As the disciples of Eurozone austerity are being unceremoniously booted out of office, now might be a good time for us to discuss whether the backlash against British austerity, which has been growing since the formation of the coalition, has the potential to expand and provoke yet another government to fall.
The announcement of Britain's slide back into recession is the result of a collapse of confidence. Put simply: nobody wants to spend at a time when their jobs and homes are at risk, leading to a self-fulfilling prophecy of economic stagnation. The issue is not necessarily a shortage of cash, more a reluctance to spend on the part of those holding it. As has been observed elsewhere, British businesses are currently sitting on reserves of over £600bn, though are presently choosing not to invest it. The banks too have been criticised recently for their reluctance to lend, particularly to small and medium-sized businesses.
It's no secret that the Conservative party loathes big government. It should therefore come as little surprise that our Prime Minister has used the pretext of "paying down the debt" and the rather worn-out "cleaning up Labour's mess" as an excuse to drive down wages, weaken employment rules, reduce funding to local authorities and make large cuts to the welfare bill.
For me, this is the biggest tactical error Cameron made. He saw austerity not as a reliable strategy for reducing the deficit, but as a lackadaisical shortcut for his long-term aim of reducing the size of the state. He remains steadfastly wedded to a failed ideology, with little room for manoeuvre and little concern for how the effects of the policy would play out over the short-term.
As 2012 has trundled on, the IMF (formerly a huge cheerleader for the coalition plan) have begun to warn against the dangers of austerity and even some of the more right-wing British newspapers have published pieces calling for some form of stimulus or a slowing in the pace of cuts in the face of ever-shrinking demand and rising unemployment. Whilst I was deeply unimpressed with Labour's rather vague acceptance of "some" cuts, their sound-bite of "too far, too fast" does appear to have gained increasing credibility in political debate over the course of this year.
The Financial Times this weekend, whilst reviewing a new book by the patron saint of austerity critics, the Nobel-winning economist Paul Krugman, had this to say on his predictions of two years ago, that all of this "belt-tightening" would inevitably fail and that large-scale fiscal stimulus was the most reliable strategy to encourage growth in the aftermath of the crisis.
You can argue otherwise, and some economists do, but most evidence from the last few years suggests that Krugman is basically right.
As someone who has stressed the faults of austerity since the birth of the coalition, watching a crisis of the markets being somehow transformed into a crisis of government spending, the debate taking place in Europe at the moment is music to my ears. However, there are still many problems to overcome if Britain is to escape from the ideological kamikaze mission that Cameron and Osborne have set us on.
A promise to reduce the deficit faster than Labour was - although somewhat lacking in detail - a key focus of the Conservative's 2010 election campaign. The first hint that they may be abandoning their chosen strategy would represent a substantial humiliation. Suggestions of a Plan B are dismissed immediately by Osborne and others in the cabinet. It must also be said that the Tories are boosted here by the lack of a clear and costed economic alternative from the opposition.
Labour, which has increased its lead in the polls following the "omnishambles" budget, enjoyed considerable success at the local elections earlier this month. However, much of this appears to be due to a succession of mistakes made by the coalition, rather than it representing a specific endorsement for Ed Miliband and his economic policies. Or lack of them, as the case may be.
So what can Labour do to turn their local election success into widespread support by the time of the next election? In my opinion, they urgently need to take Krugman's advice and run with it, promising short-term growth through fiscal stimulus. Whilst it is always important to plan for the future, if the short term economic outlook has us trapped in recession, we really needn't concern ourselves too much with longer-term projections at this stage.
However, if confidence can be boosted by government spending (as economists like Krugman and Joseph Stiglitz say it can) then unemployment will decrease and tax receipts will increase, with only a marginal impact on the deficit and a far better economic outlook from the OECD, IMF and others.
This would leave open to Labour the option of reducing the deficit, which is far from unprecedented in historical terms, "in good times" rather than through the self-defeating strategy of shedding jobs, public services and support for the vulnerable at the time it is needed most, a shock-doctrine which has now surely failed in its intended aim of deficit reduction.
As Ed Miliband quite correctly states, the double-dip is a "recession made in Downing Street". With a brave (some might say uncharacteristic) stimulus strategy from Labour, perhaps the nation can claw its way out of crisis. Who knows, if Cameron and Osborne's inept handling of the economy continues and Miliband can rebuild voters shattered confidence in Labour, he may very well find himself with the keys to Number 10 before 2015. Stranger things have happened.