Prime Minister David Cameron insisted today that the Government will “finish the job” of getting Britain's debt under control, as he came under intense pressure for a change in course to revive growth.
Yesterday's woeful growth figures, which showed the UK economy sliding deeper into recession with a 0.7% fall in GDP between April and June, led to calls from within the Conservative Party for George Osborne to be replaced as Chancellor or stripped of his job as head of election strategy.
Liberal Democrat Business Secretary Vince Cable was forced to deny he was angling for Mr Osborne's job, after telling the BBC he would "probably" make a good Chancellor.
And Labour leader Ed Miliband called for a new approach, accusing the Prime Minister of complacency over "an economic plan that is failing".
But the Chancellor received a strong endorsement from the head of the Organisation for Economic Co-operation and Development, Angel Gurria, who urged him to "persevere" with his deficit-reduction strategy and "stay the course".
Mr Gurria told Radio 4's Today programme that Mr Osborne was "sowing the seeds of what will be the elements for recovery" and warned that any weakening of resolve would be punished by the ratings agencies and the markets.
The 0.7% contraction in GDP means Britain has had negative growth for three consecutive quarters, leaving it mired in the longest double-dip recession since quarterly records began in 1955, and possibly since the Second World War.
Mr Cameron acknowledged the figures were "very disappointing" and promised to do more to stimulate growth by attracting inward investment and supporting infrastructure and housing development.
But he insisted he would not abandon his economic policy, telling an investment conference at London's Lancaster House: "We've taken bold decisions to sort out our public finances and earn credibility with the markets. As a result, in just two years we have already cut the deficit by over a quarter. Our interest rates are less than 2%.
"And my message today is clear and unequivocal. Be in no doubt: we will go on and finish the job."
Mr Miliband responded: "These figures were not just disappointing, they were a disaster. The Prime Minister seems complacent. He promised change, he promised things would get better but it hasn't happened.
"What I want to say to British businesses and British families is that there is another way forward, there is another way to get people back to work."
Mr Osborne dismissed the Labour leader's call for change, telling the Lancaster House conference: "You will hear those arguing that we should abandon our plan and spend and borrow our way out of debt.
"You hear that argument again today. These are the siren voices luring Britain onto the rock. We won't go there."
Making a pitch to boost inward investment, Mr Cameron told his audience of business leaders and international policy-makers - many of them in London for the Olympics - that "Britain is back open for business".
"At a time when it is global business partnerships, new investments and start-up ventures that will help get the world back to growth, nothing symbolises the opportunity of partnership and collaboration more than the Olympics," said the Prime Minister.
"So yes, I want medals for Britain, and there will be no more passionate supporter of Team GB than me. But I've got a job to do this summer, and a big part of that job is to get behind British business, and do everything I can to help secure the trade and investment that will help get the world back to sustained, global growth."
But he faced rumblings of discontent from within his own party over Mr Osborne's performance.
Mid-Bedfordshire MP Nadine Dorries called for Foreign Secretary William Hague to be given the Chancellor's job, while Tory peer Lord Ryder said Osborne should "of course" be stripped of his party role.
Describing both Cameron and Osborne as tacticians "obsessed with the management of 24-hour news", Lord Ryder said: "The Treasury deserves the Chancellor to be there on a full-time basis and to ensure it develops a proper economic strategy."
Mr Cable defended Mr Osborne from the charge that he is a "part-time Chancellor"
"We both work hard and we both work full time on what we are supposed to be doing, which is getting this crisis-hit economy out of the mire in which we find ourselves," he told the Today programme.
Asked if he wanted to be Chancellor himself, Mr Cable said: "I am not pushing for the job. We are part of a team. We have a collective agreed policy and I am delivering on my bit of it, which centres on the area of industrial strategy.
"I am not proposing a radically different approach."
If he were to be made chancellor, he said, "I would be building on what George Osborne has already achieved".
Describing the aftermath of the financial crash as a "once-in-a-lifetime phenomenon", Mr Cable said the Government was now pursuing "Plan A-plus", combining fiscal discipline with targeted support for infrastructure and housing.
"I think it is right and necessary that we have budget discipline," said the Business Secretary. "That is the path we have embarked on and we must stick with that."