The government is "absolutely not going to change course" on reducing the deficit, Deputy Prime Minister Nick Clegg has insisted.
The latest GDP figures showed the UK economy shrank by 0.3% in the last three months of 2012, fuelling fears the economy could re-enter recession.
Mr Clegg said the government was "resolute" and "restlessly creative" in finding ways to make the economy grow.
He also said the government was finding new ways to boost capital investment.
But he warned against a return to the "bad old days" of extensive borrowing.
Mr Clegg's comments come amid rising calls for a new economic strategy in the face of the GDP contraction and figures showing a slight year-on-year increase in public sector net borrowing.
'Long, hard road'Last week, IMF chief economist Olivier Blanchard suggested that Chancellor George Osborne should consider slowing down austerity measures in his March budget, and London mayor Boris Johnson urged his Tory colleague to "junk talk of austerity" and press ahead with major infrastructure projects.
The deputy prime minister told the BBC's Andrew Marr show: "You can be very tough on the deficit, which we have - we have reduced it by a quarter - and you can be restlessly creative about how within those strictures you do things to make the economy grow.
"We're being tough, but pragmatic. We are being resolute, but innovative. If people have ideas about how we can provide further capital investment into our infrastructure, without breaking the bank, of course we are open to that.
"We are absolutely not going to change course in paying off one of the world's largest budget deficits - why? Because if you just shrug your shoulders and say 'it's too complicated', we end up asking our children and grandchildren to pay off this generation's debts."
Mr Clegg defended comments he made in a magazine interview in which he appeared to suggest the coalition government had cut capital spending too much when it came into office.
"What I was describing is what is the fact... What we did in the first instance, Labour said there was no money left so we couldn't go around writing cheques.
"What we have done since then is systematically found ways to raise new capital."
He highlighted Crossrail - a new rail line which will run from east to west across London - as one of the largest infrastructure projects in Europe and said Monday's expected announcement to extend the £33bn high-speed rail line to Manchester and Leeds would "heal the north south divide".
Treasury-backed guarantees would also help drive private sector investment in infrastructure, Mr Clegg said, allowing investors to take advantage of lower borrowing costs.
Mr Clegg admitted that there was "a long hard road" ahead to secure the economic recovery and said some parts of the economy were going to "take longer to repair than anybody anticipated".
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