OTTAWA – The Conservatives admitted today that the federal government deficit would be worse — a total of $101 billion this year and next — than expected and that the government cannot say when it will balance the books again.

In a hastily-released fiscal update, Finance Minister Jim Flaherty said the severe economic recession means that, between now and 2014-15, Ottawa's budget shortfall will total more than $160 billion, the government said.

A senior federal government official briefing reporters said there is too much uncertainty about the pace of the economic recovery to predict when the federal accounts can be balanced.

It may take between five and 10 years to put an end to the federal deficit, the official said. But a spokesperson for Flaherty said the government hopes to do so sooner.

Flaherty said that, once the recovery takes place, the government will attempt to balance its books by cutting the growth in government spending. The Conservatives would not raise taxes or trim transfer payments to the provinces, he said in a speech in Victoria.

"But restraining the growth in government spending will still mean tough choices for the government," Flaherty said. "It will require decisions of government that won't always be popular or pain-free."

Payments to seniors, students and transfers to the provinces for health services will not be cut, federal government officials said.

Explaining the further deterioration in federal finances, the government said in the update papers that "the sharp drop-off in global activity and incomes has reduced revenues and pushed up government deficits world-wide" and Canada has suffered a similar impact.

Flaherty said the economy is improving but the recovery is fragile. He predicted economic growth of minus 2.3 per cent this year, much worse than the minus 0.8 per cent forecast in the January budget.

But the economy will bounce back and expand by 2.3 per cent next year., he said

Unemployment will continue to rise and hit 9 per cent next year, up from the 7.7 per cent predicted in the January budget, the government said.

In the budget, Flaherty had predicted that the government would begin running budget surpluses again in 2013-14 but he now says there will be an $11.2 billion deficit that year, followed by another deficit of $5.2 billion the following year.

He said the deficit this year will hit $55.9 billion, up from the $33.7 billion shortfall predicted in January. And next year's deficit will hit $45.3 billion, up from the January prediction of $30 billion.

During last year's election campaign, Prime Minister Stephen Harper said Canada would not suffer an economic recession and the federal government would not run a budget deficit. With another election looming, Flaherty has expressed a determination to talk about how the Conservatives would extricate themselves from the deficits they are now facing.

Flaherty said in his speech the uncertain economic times mean the Liberal Opposition's sabre rattling over an election is bad timing for the country.

"Now is not the time to put economic recovery at risk with political opportunism. This is not the time to create instability out of narrow, partisan self-interest," he said.

"This is not the time to play political games."

Opposition Liberal Leader Michael Ignatieff said Flaherty's budget numbers keep getting worse.

"Mr. Flaherty has a credibility problem. The government has a credibility problem," said Ignatieff.

Flaherty originally said the Canadian economy would not slip into recession and the budget would remain balanced, he said.

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"And now he's saying we'll get back to balance in 2015," said Ignatieff. "If pigs can fly."

Flaherty said Canada is doing a good job grappling with the global recession compared to other countries.

Flaherty said Ignatieff "ought to look at the numbers."

"Where does the $55 billion (deficit) come from? Certainly he knows the investment we made in General Motors. Is he against that?"

"Certainly he knows the investment we made in Chrysler to save jobs in Canada. Is he against that?"

Economists said Flaherty's new timeline for reaching a balanced budget is achievable, assuming the economy grows predictably for the next six years and the government can drastically reduce its appetite for spending.

In order to achieve his targets, Flaherty would need to keep spending growth at about three per cent per year for the outgoing four years of his projection and that's not enough to cover expected inflation and population growth.

"It's implying a lot of restraint,`` said Paul Ferley, assistant chief economist with the Royal Bank. "That was an issue with the budget in January, and it is still a problem.`` "

In a recent assessment, Toronto-economist Dale Orr said the government would need until 2017-18 to grow out of deficit with reasonable spending restraint, adding to achieve the target further, Ottawa would likely need to raise taxes.

— With files from The Canadian Press

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