The UK is officially in recession: Wednseday’s figures show a 0.2% contraction in the first quarter after one of 0.3% in the final three months of 2011. The City and its media acolytes have got egg all over their face after predicting a “bounce-back” of 0.1% growth; a 3% collapse in construction activity put paid to their forecasts. So, too, has George Osborne. The British economy has grown by 0.4% in the eight quarters of his tenure compared with the 4.3% he promised, according to @faisalislam of Channel 4 News.

On cue, the Chancellor is, first, blaming the eurozone’s actual or pending recession for the decline in British economic output – and sticking to his “credible” Plan A of spending cuts/tax rises to slash the budget deficit and, magically, restore growth. He, Angela Merkel and, perhaps, Mark Rutte, the hapless Dutch premier, are the only ones left in Europe promoting this austerity course.

We’ve seen the social pain and unrest this course brings and, now, increasingly, the political impact: the centre no longer holds, voters drift to the extremes. Paul Mason of Newsnight has a good take on this. As has the Guardian’s Ian Traynor. The economic recovery may be taking longer in Europe than in the 1930s but we are not – yet – in the socio-political extremes of that terrible decade.

Germany, presiding over a virtually non-existent budget deficit, a 20-year low in unemployment and (until recently) record exports, is starting to feel the tensions. The German press is awash with reports of Merkel’s growing isolation in Europe. There are even strong suggestions her coalition may not survive until the autumn of 2013 when fresh elections are due (or she may call an early dissolution of the Bundestag). Rutte, cheerleader for austerity as the path to virtuous growth, may limp on for a few months in The Hague.

The wind, for once, appears to be in the centre-left’s sails as Francois Hollande inches his way towards the Elysée. Backed by conservative/technocrat leaders in Italy, Spain and Greece, he believes a pro-growth strategy is essential to bring the EZ and EU as a whole out of the mire. Some of what this means is spelled out in the Financial Times: ‘Hollande seeks wider EU fiscal pact’ by Hugh Carnegy, and also from yesterday’s edition, ‘Sinking Dutchman haunts the eurozone’. If we believe what Michel Sapin, ex-finance minister, tells the FT, Hollande’s proposals are modest. Far from promoting neo-Keynesianism in one or more countries, or demanding a root-and-branch renegotiation of Merkel’s fiscal pact, he’s talking about: project bonds, a more activist R&D policy, and a bigger role for the European Investment Bank in backing trans-European infrastructure projects. This is Barroso’s EU2020 strategy (and the old Lisbon strategy of 2000) revisited in a minor key – hardly enough to enflame fear and loathing on the bond markets.

The key – and Dave and Osborne are right to emphasise this – is Merkel’s Germany. Not much sign of a change of heart yet though. Austerity worked for Germany turning it from sick man back into model economy, runs the mantra in her CDU, which believes it’s therefore right for everybody. Plainly, it’s not – and certainly not for the UK. Joining forces with Spain’s Rajoy and Italy’s Monti – as Cameron did in his pro-growth letter of earlier this year – may not be enough to turn the Eiserne Lady; getting a mildly socialist Hollande on board would help. Why not seize the chance of a brittle Franco-German axis to inject some eurorealism into Europe’s economic policy debate and stop what the FT rightly calls “Europe’s self-harming.” A nous deux maintenant!