01/16/2012 12:32 EST | Updated 03/16/2012 05:12 EDT

Canada Economy 2012: Stephen Harper Warns Of 'Tough' Economic Choices To Be Made

OTTAWA - With Europe on the verge of a new recession and the rest of the world facing economic uncertainty, Prime Minister Stephen Harper warns that 2012 will undoubtedly be another challenging year for Canada.

But he wants Canadians to know that he feels their pain.

"Canadians have consistently told us the economy is their top priority," Harper wrote Sunday in a letter to Conservative MPs.

"They are concerned about their jobs, their families and their financial security. We have listened to their concerns and we have acted with Canada’s Economic Action Plan."

But creating those jobs won't be easy, and Harper warns that "tough, important choices" will have to be made to keep the Canadian economy growing.

"We must make those choices – choices that will lead to greater prosperity - but we must make them together with the Canadian people," Harper said.

The federal government has increased spending every year for the last five years, but while 1.4 million Canadians are unemployed, Finance Minister Jim Flaherty has said such spending schemes will increase deficits and raise taxes.

Flaherty has warned that the budgets of several departments could be cut by more than 10 per cent as the government reviews all spending in federal departments and agencies. He's also said that issues such as pension reform and other benefits for public servants are under the microscope.

A special committee from Treasury Board has been looking over each department and agency and will come up with recommendations on what can be cut as part of the budget process.

Harper is taking that process a step further by asking for input from entrepreneurs, workers, small businesses and ordinary Canadians.

"Therefore, I am requesting that ministers take time in the coming weeks to travel the country and consult with Canadians on Economic Action Plan 2012."

Harper says the new budget will focus on five key areas, including — expanding trade and opening new markets, investing in research and development, contributing to skills training, eliminating red tape, keeping taxes low and controlling debt and deficits.

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