George Osborne last night told captains of industry the Coalition's economic policy was on the right course.
It came as an Ipsos Mori poll said economic optimism was at a three-year high.
"Now is not the time to lose our nerve. Let's not listen to those who would take us back to square one. Let's carry on doing what is right for Britain. Let's see this through," Mr Osborne said.
In his speech to the CBI dinner in London, the Chancellor admitted the recovery was taking longer than expected but there had been "substantive, real progress" with 1.2 million new private sector jobs, a fall in the deficit by one-third and the most competitive business tax regime in the G20 by 2015.
Pointing to yesterday's rise in UK unemployment, Mr Osborne insisted there would always be obstacles on the way but stressed: "The fact is, the most recent economic news has been more encouraging. The economy is growing. Surveys are better. Confidence is returning to financial markets."
The Chancellor branded Labour's plan for more borrowing as "ludicrous" and attacked the advocates of a looser fiscal policy, saying: "Are they really suggesting we should set out to increase our deficit year on year when it is still larger than when Britain went to the IMF in 1976 and one of the highest in the western world today?"
He said if the financial markets sensed the UK was going to print its way out of trouble, the response in the markets would be catastrophic.
"The people who would pay the price are the millions employed by the companies represented in this room and the millions of families who would face higher mortgage rates," he added.
Meanwhile, figures showed France has fallen into a triple-dip recession.
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