A defining moment is approaching – is Cameron up to it?

Points of inflection in politics follow points of economic inflection very closely. 2008 was one as was 1992 (post the election unfortunately.) There is a now a better than evens chance that 2011/2012 could be one also. The still unresolved eurozone crisis is David Cameron’s first real crisis. So far he has fared very poorly indeed.

The European Commission has forecasted UK growth of 0.7% this year, 0.6% next year and only 1.5% in 2013. This compares to March OBR forecasts of 1.7%, 2.5%, and 2.9%. And who is to say that downward revisions are at an end?

The deficit will creep rather than plummet down with these levels of growth. George Osborne will almost certainly miss his ambition to meet his fiscal target of eliminating the cyclically-adjusted current deficit by 2016 a year early. In fact, he may well miss his target altogether as a second, even more severe austerity package in 2013 – within two years of an election, with the NHS and other public services suffering, unemployment still high and incomes stalled – seems unthinkable.

Labour’s reputation for economic competence was shattered from 2008 on. Osborne and Cameron are on course to suffer the same fate. In this context, today’s Telegraph letter from 30 ‘City leaders’ demanding that the 50p tax rate is axed seems like some really dumb joke. And so does David Cameron’s performance on the world stage in recent weeks.

Of course, potential eurozone meltdown will be the predictable alibi. Like Labour’s claim that is was the victim of purely global forces it contains more truth than politically convenient line of defence. Spending cuts in the UK didn’t cause the eurozone crisis: structural euro weakness, morally hazardous borrowing, economic weakness, and weak political resolution amongst European leaders did. However, it is its response that will define this Government.

Crises define leaders and this emerging crisis has shown David Cameron to be a weak and unimaginative leader. This is a time for statesmen. The UK has a retail politician at the helm instead.

For David Cameron, leadership is standing at the edge of the fight away from the fray screaming ‘stop it, stop it.’ It is ‘time for action’ he cries but it is others who must act in this cowardly response. His performance in the cauldron of European and international summitry has been pathetic. He cowers in the presence of his own backbenchers. This is a man who was made to play the part of a leader but not made for leadership. And now the make-up is starting to run as nervous beads of sweat start to fall.

Jonathan Freedland argued earlier this week that it was time for a re-assessment of Gordon Brown in Number 10. Whatever the politics of 2008-09, he rose to the occasion and galvanised the international community into action. He didn’t tell them all to act on his behalf. He took tough and decisive action; he led by example. David Cameron fares ill by comparison.

So we are facing a defining moment. The political future will be seized not by the person who has the best story of how we got here but by the leader who can understand what needs to be done and how an international coalition can be secured to get us there. But this is not about politics ultimately. It is about our economic future. If David Cameron had any sense he’d swallow his arrogant pride, pick up the phone to Gordon Brown and say ‘I need to act, what advice do you have?’ This is Lehmans times ten. The stakes are that high.

So this is it. This is the moment. Ed Miliband has shown the early signs of getting to grips with the arguments about what need to be done. Though Labour too demands more action of others – the ECB in the main though the real target is Germany – than we are willing to take ourselves.

Having said that, Germany does need to ditch its historical aversion to money-supply induced hyper-inflation. That’s why it is reluctant to allow the ECB to make a large intervention to take up sovereign debt. But as Martin Wolff explains based on a paper by Nouriel Roubini the choice is hurtling towards this option or the break-up of the euro. As a now infamous UBS paper on euro break-up has argued, this could have some terrifying consequences. That’s the choice: intervention or chaos.

The UK has an interest in avoiding that fate. Remember, Ireland is on our doorstep and our economy relies on eurozone growth. Our escape route was to devalue and then export our way out of recession. As things stand, that exit is barred. This is our problem as much as everyone else’s. True leadership would articulate that loud and clear and take the tough decisions that flow from that realisation.

So here we are. A defining moment. Yet, we have a PM who is anything but ready. David Cameron the unready – a latter day Aethelred. Perhaps he can free himself from unwise counsel, perhaps not. In the chaos of this moment will a leader emerge? David Cameron seems ill-equipped, so it is to elsewhere that people could begin to turn.