Official forecasts of British economic growth were slashed by the Office for Budget Responsibility (OBR) today.
But Chancellor George Osborne told the House of Commons that the independent OBR is not predicting recession for the UK - as the Organisation for Economic Co-operation and Development (OECD) did yesterday.
The OBR predicted growth at 0.9% for this year and 0.7% for 2012 - down sharply from its forecasts of 1.7% and 2.5% at the time of the March Budget. Growth is then expected to pick up to 2.1% in 2013, 2.7% in 2014, and 3% in 2015 and 2016.
Mr Osborne acknowledged he would not be able to meet his aim of eliminating the UK's deficit and seeing national debt falling by 2014/15 - a year ahead of target - because "that headroom has now disappeared".
Delivering his keenly-awaited autumn statement, Mr Osborne said that the OBR blamed lower than expected growth on the sovereign debt crisis in the euro zone.
"Much of Europe now appears to be heading into a recession caused by a chronic lack of confidence in the ability of countries to deal with their debts. We will do whatever it takes to protect Britain from this debt storm while doing all we can to build the foundations of future growth,'' Mr Osborne said.
He warned if the rest of Europe went into recession "it may prove hard to avoid one here", but added that "extensive contingency planning" was being carried out to deal with "all the potential outcomes" of the euro crisis.
Mr Osborne also announced a £30 billion plan to boost the UK's infrastructure.
He also said £20 billion would be available under a national loan guarantee scheme, which will use the use low interest rates the British government enjoys to reduce the levels at which small businesses can borrow.
