It's 2017 and for battered Britain the cuts are at last coming to an end. It is 20 years since Tony Blair arrived in Downing Street to cheering crowds and with the slogan of Things Can Only Get Better. But after six long years of austerity the slogan hardly feels fitting in a grey country still suffering the after-effects of the longest decline in living standards in its history.

Instead, the national mood is best captured by another anniversary: the centenary of the Third Battle of Ypres; the offensive in the first world war that symbolised the aim of wearing down the enemy through brutal attrition.

There is, in truth, a sense of relief in 2017 – things could have been still worse.

At the end of 2011 and well into 2012, it was touch and go whether the eurozone would make it through what developed into a life-or-death struggle. There were fears that the departure of Greece from the single currency would have a snowball effect, with nine or 10 other countries breaking away in a chaotic disintegration of a monetary union that was supposed to last for ever.

Back in early December 2011, the then governor of the Bank of England, Sir Mervyn King, had said European banks risked being gripped by a systemic crisis. Officials at Threadneedle Street had worked with their colleagues at the Treasury to draw up contingency plans for a collapse of the single currency, which they suspected would lead to runs on the banks, as some of the weaker financial institutions went to the wall.

Neither the Bank nor the Treasury published forecasts for the damage that they believed Götterdämmerung for the euro would cause. Others did, however.

Danny Gabay of the Fathom Consultancy said a disorderly break-up of the euro would be one and a half times as damaging to the UK economy as the recession that followed the bankruptcy of Lehman Brothers in 2008, the deepest Britain had experienced since the second world war.

Even so, the fact that Europe had come so close to the brink had a cost. Business and consumer confidence slumped. Factories came to a standstill and the banks stopped lending. The eurozone retrenched heavily in 2012, taking the UK with it.

The then chancellor, George Osborne, was forced to admit that Britain would suffer a double-dip recession, with knock-on consequences for the public finances and his deficit-reduction plan.

Osborne originally promised that the austerity would be over by 2015. Then, it was 2017. But the crisis in the single currency meant that further cuts in public spending and fresh tax increases were felt necessary to balance the country's books.

The good news is that by the centenary of Armistice Day in 2018, the slog through the financial mud will at last be over. The bad news is that the cost has been high.

The slow recovery from the two recessions of 2008-09 and 2012 means that living standards for those on median incomes have only just regained the levels seen 15 years earlier, a performance that historians say is unprecedented in the modern industrial age.

The scar tissue from the recession is still livid: unemployment is only slowly coming down from its peak of 3.25 million, and from the lost decade has emerged a lost generation of young people who have shuffled from dole queue to training scheme, to low-paid jobs and back into unemployment.

Riots on the streets are no longer the shock they were in 2011, but have instead become part of Britain's summer season along with Wimbledon and Royal Ascot.

For Britain, the period of cold turkey as it weaned itself off debt addiction has been long and painful. The search goes on for a balanced and sustainable economic model; there is some breast-beating about the failure of the UK to invest quickly enough and deeply enough in the new industrial sectors – green technology, in particular – that are being pioneered in Germany, Japan and the United States.

More people now take their holidays at home, because the sharp fall in the value of the pound has made foreign travel so eye-wateringly expensive. The flipside to the weakness of sterling is that Britain's exports are cheaper, but such is the shrivelled state of the country's manufacturing base that the balance of trade is still heavily in the red.

In 2017, the two big debates in policy circles are whether Britain is a de-developing country and by how much the state should shrink.

Crystal ball-gazing is always fraught with danger, and even in 2011 some believed it was possible that the economy would do better than expected. There were some economists and political analysts who believed that Osborne painted a particularly gruesome picture in his autumn statement in the hope that things can "only get better" and that the eurozone would sort out its problems speedily and effectively. The colossal stimulus thrown at the economy by the Bank of England and the Treasury might have finally led to a pick-up in demand. Companies with money in the bank might have started spending it on new investment. The philosopher's stone of balanced growth might at last have been found. Had that happened, growth would have been stronger, unemployment lower, and incomes higher. Austerity would have ended sooner.

But the dystopia of Britain sketched out here is only slightly less gloomy than the view held in 2011 by the Treasury, the Bank and outside bodies such as the Institute for Fiscal Studies. They all recognised that there was more pain to come. None of them expected it would be all over by Christmas.