Osborne went considerably off the leash with his claims, saying that Labour secretly planned to raise income tax, and implying that civil servants had, in allowing the plans to be forged, given up something of their political impartiality. Stung, the servants told Osborne to drop the Hardy Boys schtick – the “secret plans” were actually in the public domain as part of the Budget, and the increase in income tax was tied to the ongoing growth in the economy.

He’s set in motion the kind of political Pokemon battle we get every election cycle, where each side fires its rhetorical magic at the other in turn, until one of them emerges the victor – so much for Osborne’s recent condemnation of electioneering. But with his vicious fireball deflected by the backroom staff, he was left dangerously exposed over the weekend. Mandelson, I choose you!

The business secretary and veteran political warhorse described Osborne thus: ”Like a boy in a man’s job”. Saucer of milk, etc etc, but while we wait for the homophobic reaction that dogs Mandy’s every move (let alone when he’s talking about boys and men) David Miliband has also slagged Osborne, describing him as “not a serious person”. He described the Tories’ tactics as “juvenile and student politics…the politics of the big lie and the big smear”. Treasury Chief Secretary Liam Byrne added: “this truth problem for Mr Osborne is becoming a pattern of behaviour”. Vince Cable meanwhile has managed to get mileage out of both his opponents in a single sentence, saying: “The public doesn’t need George Osborne’s imaginary secret documents or conspiracy theories to work out that the public finances are in a bad shape”. 

The Tories were also hurt by the Lib Dems rooting through their post-election plans and finding over £50bn of spending pledges that don’t really chime with Osborne’s prudence – new-school policies like high-speed rail sit next to classic Tory stances like cutting inheritance tax.

While it’s all good fun to see the internecine bitchery of The Hills get transplanted onto the UK’s political scene, this all seems like a case of electioneering distorting the genuinely necessary action. Cuts will be an inevitable part of the next government, whoever it is – the public discomfort at a rocketing deficit can’t be ignored. But the need to score points off and differentiate themselves from Labour has drawn the Conservatives, and to an even greater extent the Lib Dems, towards a economic model based on arch prudence. This is framed for maximum gain as brave and wise, positioned opposite Labour’s supposed recklessness with the public balance sheet.

But it’s too soon to make cuts, and using them as such a hot political topic is dangerous; fiscal stimulus needs to carry on for some time yet. Keynesian economists like Robert Skidelsky and William Keegan have written over the weekend about the importance of letting fiscal stimulus continue, Skidelsky with a simplicity that is either charmingly optimistic or dangerously reductive depending on your leanings: “Had the Government given everyone a spending voucher of £500 last Christmas, the chances are we would have had no output gap and full employment today!”

But for all the weirdly mechanistic and presumptive nature of Keynes, his ideas are still valid, and to ignore them for brief political gain would be disastrous. The recent crowing about the end of the recession, along with the City-minded political economists, means that talk of cuts might not seem too premature, but if the stimulus is cut back before much of the country has had time to feel it, then any future government could find itself with a hole where its income tax should be. Once the economy is genuinely growing again, with consumer spending steady, then we can start worrying about the deficit. At the moment, all the talk of cuts is only benefitting political strategists.

The first wave of hesitant calling of the end came in May, with Jean-Claude Trichet, George Soros and others saying an inflection point had been reached, with the economy heading back upwards. A quarter later, and people are saying that the recession is genuinely, officially over (there needs to be two quarters of consecutive GDP growth for it to be semantically, if not realistically, laid to rest). Ben Bernanke, US Fed chairman and recent receiver of mad love and props, said yesterday it is “very likely over”, with a reported rise in consumer spending seeming to underline his soothsaying.

Meanwhile, “arc of insolvency” members Scotland are saying they’re on the way up too, Lloyds Scotland’s chief economist Donald MacRae claims; Mervyn King says all’s well south of the border too, claiming “there are now signs that growth has resumed in the third quarter”; Mandy gave his optimistic two cents last week in China; these folks that the Guardian memorably interviewed at the beginning of the year seem to be on the up; and Wachovia’s senior economist Mark Vitner has said that we’re firmly in recovery mode though added, while upholding the tradition of dodgy meteorological metaphors beloved of economists: “Technically, it’s not freezing but it’s still pretty darn cold outside and you see ice everywhere”.

Yes, that’s the ice of real-term economic misery he’s clumsily referring to – while all this is pretty impressive given the dire straits we were in this time last year, unemployment is still a major inhibitor on quality of life and consumer spending. While the City is looking at the GDP growth, the likes of Next are looking at the high street: “we anticipate that the public sector deficit will become the dominant influence on the economy, bringing with it the combined downside risks of further increases in taxation and cuts in government expenditure”. Brown’s use of the c-word yesterday means that things like tax credits and general welfare could be cut, and taxes brought up to fight the massive deficit, thus impacting on people’s spending power. Meanwhile Chris Dodd, head of the US Senate banking committee, bluntly burst Bernanke’s balloon, saying “I don’t think it’s over”.

So basically until you see banks are overleveraging themselves into multinational deals, and people blithely acquiring 110% mortgages and living on credit cards, you can assume we’re still in the “bust” bit of the cycle.

At a diplomatic cocktail reception in New York, Mandy was heard responding: “Why should I have this guy running down the country? Who the fuck is he? How the hell are they [Starbucks] doing?” – definitely on the way to having a full-blown Christian Bale moment.  

The remark obviously was a dig at Starbucks’ current financial state; they announced the closure of almost 1,000 stores in recent months at a cost of nearly 7,000 jobs. The chain also suffered a 69% plunge in profits. 

The bantering between the two 55-year-old power mongers continued throughout the day. Schultz continued his theme: “Unemployment, the sub-prime mortgage crisis, particularly in the UK, and I think consumer confidence, particularly in the UK, is very, very poor.” The UK affected by sub-prime? Only indirectly from you lot, Chaz!

The tall double no-foam non-fat latte-swilling billionaire said it had taken a year to 18 months from the beginning of the credit crunch for consumer confidence to fracture in the US, but the deterioration had happened far more quickly in Europe once financial cracks appeared.

Mandelson, who had got the rage out by this time and became rather more diplomatic, responded: “The UK is not spiraling, although I have noticed that Starbucks is in a great deal of trouble. But that may be because of their overexposure given the state of the market. So please do not project Starbucks onto the UK economy as a whole.” ”YOU’RE A NICE GUY!”, he later added.

Their ages and wealth brackets may be similar but that is where the adversaries’ similarities end. Schultz is a Brooklyn native raised in a subsidized housing project, and built Starbucks up from an tiny store to a global high street chain. The classic Horatio Alger myth, and his little shop now infests street corners all over the globe. 

On the other had there is Mandelson, who was fed with a silver spoon growing up in North London into Labour Party royalty. During his career he had to resign twice from the cabinet. The first was for failing to disclose a home loan from Geoffrey Robinson and then over the Hinduja brothers’ passport application and the complications arising from that. Now on his third round in spotlight throwing around the f-word in public venues doesn’t seem to be a step toward a better rep. But to use Mandelson’s catch phrase, he’s “a fighter, not a quitter”. 

Official figures suggest that Britain’s economy shrank by 1.5% in the fourth quarter of 2008 in comparison to the third and unemployment is nearing the 2 million mark. So we have established that both Starbucks and the UK are not doing well right now, but how people in a pickle love to play the blame game. I think we can assume Mandy and Schultz are through, professionally.

Sarkozy announced on Monday plans to give French car manufacturers €6bn in low-interest loans, as well as money for parts manufacturers. He’s hoping the move will keep Renault et al manufacturing in France amid the recession rather  than heading somewhere cheaper (Italy looks like it may follow his lead). Now questions are being raised over the legality of this generosity – as an EU member, France shouldn’t be allowed to favour domestic companies financially. Germany’s already unhappy about it, as are the Czech Republic.

The beef happens at a time when protectionism is being championed by indigenous workers and condemned by their politicians. Barack Obama has felt the full force of American industry lobbyists recently on the issue, with the steel industry clobbering the Democrats into putting a “Buy American” clause in Geithner’s new financial rescue plan; they’re still discussing how strong the clause will be, though Obama recognises the weaknesses involved. Canada’s lobbyists have done a copycat version of this clause called, yes, “Buy Canadian”. Meanwhile in the UK, the wildcat strikes over foreign workers prompted Mandy to assertthat UK business was opposed to protectionism, asserting the right for all EU citizens to work across Europe.

Protectionism amid a financial crisis is like going back to your ex at Valentine’s – you know you shouldn’t, and as a long-term plan it probably won’t work out, but right now it feels so good. You suddenly see money that was disappearing overseas suddenly flowing round the country, but as foreign traders start to stay away, dissuaded by your high tariffs, the economy begins to stagnate, ongoing job creation falls, and suddenly you’re watching DVDs from opposite ends of the sofa and not talking in restaurants, to clumsily round off the metaphor.

The World Trade Organisation has warned America against a protectionist plan; poor countries stand to lose the most from protectionism, as multinationals stay away and the exports many are dependent on dry up. And as well as protectionism of commodities and resources, the European Commission is warning against the protection of financial markets – if each European country creates their own bad bank for toxic assets, the likelihood of those being traded across borders is next to nil, and will lead to lower flexibility and willingness to start credit lending. But nevertheless, RBS is already pulling back from overseas, where 41% of its current lending lies.

So it doesn’t look like the strikers and lobbyists are going to get their way, and that anti-protectionism is pretty set in stone across governments and markets. Still, it would be a bold company that steps above the parapet and says that it’s off to Eastern Europe for the cheap labour, sod the lot of you. And with people like Paul Krugman espousing a new model of protectionism as a second-best solution that at least keeps people employed the world over, we can expect more near-protectionist suggestions to emerge as the recession deepens.

And ringing in this new week? Well, the ENTIRE automotive industry.

Suppliers of car parts, who have obviously been feeling the knock-on effects of car companies slowing production, are to request $10bn-worth of TARP funds in the US; last year 40 automotive companies, many of them suppliers, filed for bankruptcy protection. And the car parts pain continues in Germany, where Continental and Schaeffler are both asking the governments in their home states for help with their combined debt of €22bn. Of course if you happen to supply Porsche, you’ll have already been conspicuously bailed out by their CEO Wendelin Wiedeking, who recently took the opportunity to turn the plight of suppliers into a tidy bit of positive spin for himself.

Governments are also bailing out workforces. Japanese workers at Mazda and Mitsubishi are to have their earnings propped up by government aid while the companies slow down production; companies must pay at least 60% of wages on days when shifts are cancelled, and the government will be funding at least half of those sums. European companies, like Daimler, Bosch and Cartier, are using similar schemes to prevent redundancies during this hopefully short period of reduced production. 

Not joining the party though are Canadian GM and Chrysler, who refused the government loans extended to them last week, surprising given the lust for cash displayed by their American counterparts. But UK car companies will get the bailout they’ve been waiting for this week, as Mandy announces on Wednesday his plans for the industry. In short, companies will be able to access credit from the Bank of England to fund attractive financing deals for new customers.

So what of the green New Deal promised by Brown, Cameron and Obama? The Telegraph reports that some of the UK bailout money will go on “grants for ‘green’ research and development”, while the FT says that “Obama’s government is also studying other measures that could help parts suppliers over the longer term, including support for research and production of advanced batteries”. While the electric car could be the New Deal for the auto industry (just as long as Bolivia, with half the world’s lithium, doesn’t squeeze everyone trying to make electric car batteries too tightly), it all still sounds suspiciously vague – let’s hope it doesn’t get swept under the carpet amid the clamour for short-term solutions.