Like the killer in a slasher movie, the crisis that began in 2008 just won't die – no matter what you throw at it. First, it was the banks and a massive bailout. Then it was the recession and global stimulus. Then the public finance panic and austerity.

Now the evil maniac may be lurching out of the shadows once again in the form of a global currency crisis. And the impact on UK politics could be just as seismic as the previous incarnations.

If the G20 summit in Seoul this week cannot broker a peace in the heated war of words over the falling dollar then we could be heading for a free-for-all in which governments desperately try to devalue their currencies to boost their exports. The sheer uncertainty of the outcome of such a battle could knock fragile confidence and risk the tentative recovery.

What this might mean for the UK economy in the longer term is impossible to predict but it would immediately leave the chancellor with a painful headache.

George Osborne's plans for the public finances rely heavily on the Office for Budget Responsibility's forecast that the private sector is strong enough to swallow his medicine of cuts and tax rises. The introduction of a great dose of uncertainty, and possibly a new downturn, would massively increase the pressure on the chancellor to rethink the timetable for the consolidation. It's a pretty big risk for a man who has never wavered in the certainty that there is no alternative.

The government would also find itself having to make a very tough call about whose side to take in the currency war. Germany has placed itself firmly alongside China as an exporter that fears the impact of a weaker dollar. The German finance minister used undiplomatic language on Friday to describe US economic policy as "clueless". And, for good measure, laid into America again on Sunday.

If economic battle lines were drawn between the US and China, with Germany backing the latter, it is possible that fractures may begin to appear within Europe and within the coalition. Eurosceptic Tories would naturally want to side with America, while the few Europhile Tories that remain may find themselves drawn ever closer to the Lib Dems. If the international arena really heated up, the temperature in the cabinet room might get unbearable.

The situation could be made worse – and politically more complex – by the fact that there would be intense dispute over where the UK's best economic interests lay. Our economy could just as well be damaged by dearer exports as by pricier imports.

The huge risk for the coalition is that a combination of a weakened economy, a stalled austerity package and internal divisions could leave the government looking as if it was losing control of events. Labour politicians would be rubbing their hands.

In short, a currency or trade war would mean all economic and political bets were off. Osborne and David Cameron will be approaching negotiations in Seoul this week with some trepidation.