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I supported the Coalition government's decision to aggressively enforce austerity so as to avoid the ire of the financial markets. But coming over here and spending a little time in Downing Street and among Tory friends, I have to say my doubts are rising fast. The economy is dead in the water, and the massive spending cuts have yet to really bite. More worrying, Moody's has now demoted the UK credit rating from stable to negative, which may lead to a credit downgrade to – quelle horreur – the French level. The Bank of England is trying quantitative easing, but it's the only weapon left. Then there's the continued refusal of the bailed-out banks to lend to small businesses, crimping the private sector's capacity to boost growth and investment. And the real worry, of course, is a euro-zone collapse with the sudden exit of Greece and maybe others. UK Treasury officials fear that a euro-zone meltdown could reduce British GDP by up to 8 percent in one year – even during a recession that has lasted longer in the UK than the Great Depression.

Some on the right are beginning to re-think. Martin Wolf noted last week:

[T]he Institute of Fiscal Studies, which is as right-thinking as can be, in its Green Budget … states that “the case for a short-term fiscal stimulus package to boost the economy is stronger now than it was a year ago. Decisions made in the Autumn Statement are likely to have had a small but positive impact on growth. The case for taking this further is not clear-cut: ongoing uncertainty over the future fiscal situation and the importance of credibility argue against it, but the continued weakness of the economy and the low chance of monetary tightening offsetting it make a loosening look more attractive than a year ago. The case would be strengthened significantly were the outlook for the UK economy to deteriorate sharply”.

Politically, it's still working for the Tories. The Brits agree that they "need to live within our means" and are alarmed at becoming Greece. They love a little stoicism. And my impression from Downing Street is that they think they can still pull through without a new collapse as long as the euro-zone holds up. But the depression-debt trap looks much more real than it did a few months ago. So far, Labour has had no luck pushing Keynesianism, because the Brits rightly hold them responsible for reckless spending and borrowing in the good years (they were as bad as Bush); and because the pound has nothing like the resilience of the dollar as a global reserve currency.

So the current Tory view is steady as she goes. As the icebergs looms and the strait between them narrows.

(Poll of polls from YouGov's UKPollingReport. The Tories are blue, Labour red. Since the Lib-Dems are in the Coalition, approval for the government is around 48 percent, basically Obama's.)