Growing clamour for Osborne to change direction

With the overnight news that America has begun the latest attempts to address the growing crisis in the world economy with the central bank unleashing $400bn to prevent the world's largest economy sliding back into recession,there is much speculation amongst commentators that a U turn in the UK is the right way to move.

Not more so than the Telegraph's Jeremy Warner who writes that the euro crisis gives the Chancellor an opportunity to recast his deficit reduction strategy.

Jeremy writes that

The mistake the government made when selling the austerity programme to voters was to claim that the mere act of reducing the deficit would unleash a private sector revival that would counter the jobs and growth being lost to fiscal consolidation. That was never likely to be the case in circumstances where the private sector is even more indebted than the Government, and therefore vigorously engaged in exactly the same process of paying off debt. If everyone is trying to cut back all at the same time, it is a matter of simple arithmetic that overall demand will suffer.

Meanwhile at the Guardian Seumas Milne writes that only radical action will drag the economy from the brink

The breakdown of the model of capitalism that began in 2007-8 is now entering a new and potentially even more destructive phase, with the threat of another Lehmans-style spasm as European banks loaded with unrepayable sovereign debts fuel a new credit squeeze.

Concluding that

The economy is in flames and the neoliberal model that has brought it to this pass is bust – even as the political class clings stubbornly to the orthodoxies of the boom years. But those who grasp that the crisis is transforming politics will shape its future.

Even the FT believes that it is time to change tact,

If weak demand was the only problem, throwing money at it would be the simple solution. But the UK economy also appears structurally weaker than anyone had hoped.

But it adds that Private sector productivity is lower now than before the financial crisis started and coupled with that the chances of rapid growth are further diminished by rapidly declining output in the banking sector, and in oil and gas extraction.

Yesterday's Public borrowing figures were another kick in the teeth for the government's strategy with borrowing higher than it was a year ago,it rose to £15.9bn last month, compared with £14bn.

That coupled with two separate warnings from the IMF surely now increase the pressure on the government to change tact.