David Cameron will urge the country not to become paralysed by gloom and fear even though he will admit the depth of the debt crisis means the good times will be a long time coming.

In a delicate balancing act, he will try in his closing speech to the Conservative party conference on Wednesday to re-energise the country by insisting that despite the pessimism over the economy, politics and society, "the country's best days are not behind us". "Let's bring on the can-do optimism," he will say before claiming that his "leadership is about unleashing your leadership".

But despite the efforts to lift the mood of the country, Cameron will also provide a frank admission that the economy is not going to be fixed quickly. His aides openly admit that the country's finances are in worse state than they had expected – a fact underlined by repeated downgrading of official growth forecasts.

At one point he will even urge households to clear their debts: "The only way out of a debt crisis is to deal with your debts. That means households – all of us – paying off the credit card and store card bills."

In a frank assessment, he will tell delegates in Manchester: "We need to tell the truth about the overall economic situation. People understand that when the economy goes into recession, times get tough. But normally, after a while, things pick up. Strong growth returns. People get back into work. This time, it's not like that. And people want to know why the good times are so long coming.

"The answer is straightforward, but uncomfortable. This was no normal recession; we're in a debt crisis. It was caused by too much borrowing, by individuals, businesses, banks – and, most of all, governments."

He will also warn there is a limit to what government can do to speed the process of rebuilding the foundations of the economy. "When you're in a debt crisis, some of the normal things that government can do, to deal with a normal recession, like borrowing to cut taxes or increase spending, these things won't work because they lead to more debt, which would make the crisis worse."

Cameron is not expected to make any new policy announcements. Plans to announce that convicted criminals might lose some benefits were withdrawn after they were deemed by civil servants to be as yet impractical.

But the Conservatives revealed plans to require unemployed people to look for a job for several hours a day, and to be willing to accept a job within a 90-minute journey of their home or lose their benefits.

Cameron did say he was considering the possibility of a "fat tax" to address the obesity crisis in the country but little detail has been advanced. He feels the need to lift the mood partly because he is concerned that talk of a return to recession could turn into a self-fulfilling prophecy as tumbling consumer confidence reduces demand, increases worklessness and lowers demand.

He will say: "If we put in the effort, correct the mistakes, confront those vested interests and take on the failed ideas of the past then I know we can turn this ship around. Nobody wants false optimism. And I will never pretend there are short cuts to success. But success will come."

His officials identified the vested interests as trade unions, restrictive employment laws or companies that do not offer apprenticeships.

In a key passage, he will say: "The truth is, right now, we need to be energised, not paralysed by gloom and fear. Half the world is booming, let's go and sell to them. So many of our communities are thriving – let's make the rest like them ... hard working, pioneering, independent, creative, adaptable, optimistic and can do."

Amid dire economic figures, In a range of broadcast interviews on Tuesday Cameron pleaded that we must not "talk ourselves down further" but admitted: "I think it is a moment of danger. I think there are some very serious clouds on the horizon, chief among them is the problems in the eurozone where the French economy, the German economy have both stalled, and that is a real problem for the British economy."

Cameron indicated that he is to use negotiations on the future of the eurozone to demand "safeguards" to protect the position of the City of London. As EU finance minsters discussed the Greek sovereign debt crisis, gGovernment sources suggested that Britain is prepared to use its veto in future EU treaty negotiations to block any threats to the City.

The prime minister has made clear in recent months that he will call for the repatriation of social and employment laws if EU leaders embark on a fresh round of treaty negotiations to shore up the eurozone. Germany may ask for greater fiscal co-ordination within the 17-strong eurozone to avoid a repeat of the crisis in Greece, a step that would have to be agreed by all 27 members of the EU in an amendment to the Lisbon Treaty.

In an interview with Radio 4's Today programme, Cameron said that Britain would also use these negotiations to protect Britain's position in the single market – code for protecting the City. "We will need certain safeguards to make sure that what the eurozone countries are agreeing separately does not adversely affect the single market, which is in our interest to make work for the good of British business."

Ministers are currently involved in lengthy negotiations to protect the position of the City of London as Michel Barnier, the European internal market commissioner, presses for a series of financial services regulations. Britain is concerned about the European Markets Infrastructure regulation (Emir), which deals with derivatives, and the Markets in Financial Instruments Directive (Mifid), which would create a new category of trading venue.