David Cameron to tell François Hollande austerity works – but King raises alarm

David Cameron will claim today that austerity is working despite Britain's slide back into recession as he urges eurozone countries to either "make up or break up".

The Prime Minister will warn that Britons are "living in perilous economic times," having heard the Bank of England Governor, Sir Mervyn King, say yesterday that the eurozone is "tearing itself apart". But Mr Cameron will rule out any departure from his Government's tough deficit-reduction strategy. He will also reject the "something for nothing" economics of the Labour opposition, which will be seen as a criticism of François Hollande, the new Socialist President France elected on a "pro-growth" ticket.

Mr Cameron is expected to hold his first face-to-face meeting with Mr Hollande tomorrow, when both men will be in the United States for a summit of leaders from the G8 major economies. The Prime Minister is likely to side with Angela Merkel, the German Chancellor, in a debate over the right balance between austerity and growth. There could also be tension between Britain and France over Mr Hollande's plans to bring back French troops from Afghanistan from next year. The withdrawal strategy will be discussed at a Nato summit to be attended by Mr Cameron in Chicago on Sunday.

Restating his economic case today Mr Cameron will insist: "Now is the time to stand firm. We are moving in the right direction – not rushing the task, but judging it carefully. And that is why we must resist voices calling on us to retreat."

Speaking in Manchester, the Prime Minister will argue his task is to keep Britain safe and take the right rather than the easy course. Despite calls from business leaders for a more proactive growth strategy, Mr Cameron will argue that strong economic growth would not be achieved by "returning to the something-for-nothing economics that got us into this mess." He will warn: "We cannot blow the budget on more spending and more debt. It would squander all the progress we've made in these last two, tough years."

In a tough message to eurozone countries, Mr Cameron will also declare: "The eurozone is at a crossroads. It either has to make-up or it is looking at a potential break-up... Either Europe has a committed, stable, successful eurozone with an effective firewall, well-capitalised and regulated banks and supportive monetary policy. Or we are in uncharted territory which carries huge risks for everybody."

Coming so soon after Sir Mervyn said Europe's troubles mean "the path of recovery is likely to be slow and uncertain", it will mark a new level of caution about future prospects.

The Bank of England Governor listed the woes facing the country yesterday: "We have been through a big global financial crisis; the biggest downturn in world output since the 1930s; the biggest banking crisis in this country's history; the biggest fiscal deficit in our peacetime history – and our biggest trading partner, the euro area, is tearing itself apart.

"The idea that we could reasonably hope to sail serenely through this with growth close to the long-run average and inflation at 2 per cent strikes me as wholly unrealistic."