David Cameron has warned that 2011 will be a "difficult year", but insisted that Britain has a "really bright future" ahead.
In his New Year's message, the Prime Minister said that much of the "heavy lifting" for tackling the deficit in the public finances would have to take place over the next 12 months.
But he also sought to strike an upbeat note, saying that once the current problems had been dealt with, the UK could be "one of the international success stories" of the new decade.
Mr Cameron stressed that he and Deputy Prime Minister Nick Clegg were not making cuts out of "ideological zeal" but because the country had been "living seriously beyond our means".
"The national interest dictates that we do the right thing, which is to act, not the easy thing, which would be to delay. In doing so, we should be clear: Britain has a really bright future to look forward to," he said.
"2011 is going to be a difficult year, as we take hard but necessary steps to sort things out. The actions we are taking are essential, because they are putting our economy and our country on the right path. Together, we can make 2011 the year that Britain gets back on its feet."
Mr Cameron said that when the coalition Government took office last May the economy was in deep trouble, but, as a result of the actions they had taken, it was now out of the "danger zone".
After a string of Liberal Democrat ministers were caught criticising their Conservative partners to undercover reporters, Mr Cameron acknowledged that coalition politics was "not always straightforward" but said both parities were committed to working in the national interest.
Shadow Chancellor Alan Johnson said: "David Cameron is not being straight with the British people about the choices he has made. He should not be using his New Year message to mislead the public.
"The British economy was never like that of Greece or Ireland. The Governor of the Bank of England said so and even his own ministers, in their more sensible moments, say so. There are huge differences, not least in the size of the British economy. In Britain interest rates were falling long before the election."