Clegg tells rest of world not to panic over Britain's slump

Nick Clegg, the Deputy Prime Minister, yesterday refused to accept that this week's disappointing economic growth figures were an indication that austerity cuts were damaging Britain's recovery from recession, launching an unapologetic defence of the Coalition Government's policies.

Speaking to the World Economic Forum in Davos, Mr Clegg dismissed suggestions that the Government had taken a gamble on the recovery by introducing much larger cuts than previously expected. "It was an unavoidable decision because if you don't act yourself then other people will force you to do it on their terms," he said.

Mr Clegg said that on coming to power last May, the Government had quickly decided that the bond markets, which finance Britain's debt, would intervene unless ministers acted boldly. "It was a matter of our economic sovereignty," he said.

His comments followed a warning from George Soros, the financier, who earlier told the World Economic Forum he thought Britain's cuts package was bound to derail its economic recovery.

But while Mr Clegg said Tuesday's economic figures, which showed the UK economy returning to contraction in the final three months of 2010, were "disappointing", he argued that Mr Soros had miscalculated.

"This is a bold plan but it is not a plan that is being introduced overnight," he said. "Psychologically, when people hear the announcement [of a package of austerity cuts], they fear a sudden impact, but this is a five-year plan."

Mr Clegg won some support from Jean-Claude Trichet, the President of the European Central Bank, who told the forum that it was "important" that the UK had seized the initiative on austerity. "Being ahead of the curve is the appropriate mode if you want to restore confidence," M. Trichet said.