Shadow chancellor Ed Balls has called on the coalition to "change course" and revive the UK's "flatlining" economy.
Opening a Labour-led debate on the economy on 22 June 2011, one year on from the government's first Budget, Mr Balls accused Chancellor George Osborne of making an "economically illiterate and preposterous claim" that the UK was on the brink of bankruptcy.
He also warned that Prime Minister David Cameron was "foolish" to suggest that the British economy was out of the danger zone.
"Having already abolished the Child Trust Fund and Future Jobs Fund, the chancellor announced in that budget speech to take billions more out of the economy through a combination of deep spending cuts and tax rises," Mr Balls said.
"It included VAT to 20%. It included tax credit cuts for thousands of families. It also included cuts to housing benefits, pensions and disability benefits too."
He continued: "The path our economy is being taken down is the wrong one and the evidence is supporting that. It could prove very dangerous for jobs, growth, public services, living standards, the deficit and mortgage rates.
"At the very least it looks set to be a path of slow growth and higher unemployment."
Mr Balls concluded: "It is not too late to change course."
But Mr Osborne said 500,000 private sector jobs were created in the last year, and told MPs that the International Monetary Fund backed the government's deficit-elimination plan.
"That is not a fact you are likely to hear from the opposition because they are determined to talk this economy down," said the chancellor.
"Not only did the shadow chancellor attack the IMF, he also attacked the acting managing director. Literally anyone who disagrees with him, which means most of the world, has become a political opponent of the shadow chancellor."
Mr Osborne said since Mr Balls was appointed shadow chancellor, Labour's "measured economic credibility had steadily fallen", while "the reported divisions in the Labour party have steadily increased".