George Osborne is under pressure to do more to jump start the ailing economy after another set of negative growth figures put the UK on course for an unprecedented triple-dip recession.
The Chancellor George Osborne vowed not to "run away" from Britain's economic woes after the first official estimate suggested the economy shrank by an even-worse-than-expected 0.3% in the final quarter of 2012.
But the dismal picture swelled the chorus of voices on all sides demanding Mr Osborne use his Budget in March to slow his austerity drive in bid to inject life into the sluggish recovery.
Office for National Statistics (ONS) calculations showed the economy flatlined in 2012 as a whole and experts predicted it would not regain its peak level for another two years.
London mayor Boris Johnson urged his Tory colleague to "junk talk of austerity" and press ahead with major infrastructure projects to revive the economy, saying confidence was crucial.
Among senior financiers speaking out was Jim O'Neill, chairman of Goldman Sachs Asset Management, who told The Independent that the GDP reverse showed fiscal policy had been "tightened too much" by the Chancellor.
Deputy Prime Minister Nick Clegg had also appeared to admit the coalition cut spending too deeply when it took power, saying there should have been more investment in infrastructure to support growth.
He conceded yesterday that there was "some way to go before the recovery really takes root".
The Government is also braced for the loss of Britain's coveted AAA credit rating with all three major ratings agencies putting the country on negative outlook.
Shadow chancellor Ed Balls accused Mr Osborne of being "asleep at the wheel" and said now was the time for a "plan B" to promote growth through VAT cuts and spending on infrastructure.
He said: "The longer David Cameron and George Osborne cling on to their failing plan the more long-term damage will be done. They must finally listen and act to kick start this economy."
But a defiant Mr Osborne, in the Swiss ski resort of Davos for the annual World Economic Forum, declared: "We can either run away from those problems or we can confront them and I am determined to confront them so that we can go on creating jobs for the people of this country."
Asked if he disputed Mr Blanchard's analysis, he told Sky News: "I am absolutely clear that we have got the right plan but of course it is not a plan that was ever going to deliver results overnight.
"We said from the start it was a long road, it was a hard road, but it was the only road."
GDP - a broad measure for the total economy - would have to contract again this quarter for the UK to be back in recession and hopes of a rebound are starting to fade after a snow-hit start to 2013.
While the figures are preliminary estimates and subject to revision, they have dealt a blow to recovery hopes after the UK bounced back from the longest double-dip recession since the 1950s in the third quarter.
The ONS said the UK had recovered only half of the fall in GDP seen since the start of the 2008 recession, with output still 3.3% lower than its pre-recession level.
Some experts fear the economy will not fully recover until the first half of 2015.
Bank of England governor Sir Mervyn King said earlier this week that the UK had been slower to recover than most countries but insisted there were signs a "gentle recovery" was under way.
Employment continues to remain surprisingly resilient, with figures this week showing that almost 30 million adults were in a job in the quarter to November, up by more than half a million on the previous year.
Mr Osborne, the London mayor and Prime Minister David Cameron faced fire from some quarters after being pictured eating out in a Davos restaurant on the eve of the release of the ONS figures.
Greenpeace press officer Ben Stewart, who was also dining at the Alte Post pizza restaurant, said the Prime Minister and Chancellor were "laughing uproariously" despite by then knowing about the GDP slump.