Nick Clegg said he owed no apology for making painful compromises on Liberal Democrat policy and braced party members for more pain to come.
As record borrowing figures intensified the economic gloom facing the UK, the Deputy Prime Minister said there was a "long, hard road ahead".
In his keynote party conference speech, the Lib Dem leader insisted the worsening crisis underlined the wisdom of signing up to tough Tory-led cuts.
He urged activists reeling from a year of anger, frustration and hammerings at the polls to believe it would "all be worth it in the end".
"Hold your heads up and look our critics squarely in the eye," he said as he sought to reassure grassroots members that he was "fighting" for liberal values within the Cabinet.
"This country would be in deep trouble today if we had not gone into Government last year. And Britain will be a fairer nation tomorrow because we are in Government today.
"Never apologise for the difficult things we are having to do. We are serving a great country at a time of great need. There are no shortcuts, but we won't flinch.
"Our values are strong, our instincts are good: reason not prejudice; compassion not greed; hope not fear," he said at the conclusion of the Birmingham gathering.
The successful mission to "stop the NHS Bill in its tracks" demonstrated how the party was able to "hold back" the Tories and "anchor the Government in the centre ground", he said.
A string of announcements made at the conference, from gay marriage and curbing executive pay to action on empty homes, bore witness to its ability to move things forward as well.
He claimed that even the intense anger inside and outside the party over tuition fees was more down to a failure of presentation than the abandonment of a key pre-election pledge.
The increasingly barbed attacks on Tory colleagues made by senior Lib Dems as the conference progressed were conspicuously absent from Mr Clegg's script.
Instead he reserved his fire for Labour, accusing the opposition of a "clueless" approach that offered "too little too late" in response to the global turbulence buffeting the UK.
Mr Clegg conceded the Government had to "do more" to stimulate growth after a further downgrade of UK prospects by the International Monetary Fund heightened fears of a double-dip recession.
But aides insisted reports that a £5 billion injection into infrastructure was under discussion were wrong and that the coalition was united in sticking to existing spending plans.
"We were right to pull the economy back from the brink. It is clearer now than ever that deficit reduction was essential to protect the economy, to protect homes and jobs," he said.
"Deficit reduction lays the foundations for growth. But on its own it is not enough.
"The outlook for the global economy has got worse. So we need to do more, we can do more and we will do more for growth and for jobs."
In a crowd-pleasingly liberal response to the summer's riots, Mr Clegg gave details of a £50 million summer school scheme aimed at stopping problem pupils going "off the rails".
Too many of the young people who took part in the looting and disorder had "fallen through the cracks" and been left facing a future which appeared "of little value" to them, he said.
Mr Clegg praised his party for showing "resilience" in the face of a tough year in which they have shed many supporters over the coalition deal.
The week has proved less confrontational than some feared given maulings in local and regional elections and a crushing referendum defeat of cherished voting reform.
Vocal attacks on the senior coalition partner were led by party president Tim Farron, who said the arrangement had "tainted" the party and would end in divorce.
And although his and senior colleagues' Tory-bashing was rapturously received, only residual discontent over the NHS reforms prompted much anger from the floor.
No-one had realised "just how tough" it would prove to be, Mr Clegg admitted. "We've lost support, we've lost councillors, and we lost a referendum.
"I know how painful it has been to face anger and frustration on the doorstep.
"Some of you may have even wondered: Will it all be worth it in the end? It will be."
The party had suffered serious blows but "come up fighting", he said.
"Fighting to protect human rights. Fighting to create jobs. Fighting for every family. Not doing the easy thing, but doing the right thing. Not easy, but right."
Being in coalition brought "two kinds of power: the power to hold our coalition partners back and the power to move the Government forwards.
"So we can keep the Government to a liberal path. Anchor the Government in the centre ground."
That meant ending the Tories' "threat to the basic principles at the heart of our NHS", protecting civil liberties and securing fairer taxes.
Lib Dem ministers have made clear this week that they will only countenance Tory plans to scrap the 50p rate of income tax for top earners if other ways were introduced to squeeze the rich.
Mr Clegg also used his speech to warn Conservative MPs that his party would not countenance any watering down of human rights laws.
"Let me say something really clear about the Human Rights Act. In fact I'll do it in words of one syllable: It is here to stay."
He told activists his political "fire inside" was fairness and equal opportunity.
The recent riots were the consequence of "a society in which some people feel they have no stake at all", he said, in a strikingly different emphasis to Conservative ministers.
He hailed restorative justice and community sentences as the key to preventing reoffending but he also suggested the most important intervention was needed at a younger age.
"Too many of these young people had simply fallen through the cracks. Not just this summer but many summers ago, when they lost touch with their own future.
"So often the people who have gone off the rails are the ones who were struggling years earlier, not least in making that critical leap from primary to secondary school."
Cash from the Pupil Premium would be diverted from next year to provide two-week summer school courses for those most at risk, he said.
Defending the coalition's tough austerity measures, Mr Clegg said: "Burying your head in the sand: that's not liberal.
"Saddling our children with the nation's debt: that's not fair."
And he launched a personal attack on Labour leader Ed Miliband and shadow chancellor Ed Balls, calling them the "backroom boys" who presided over economic failure under the leadership of Gordon Brown.
"Labour got us into this mess. But they are clueless about how to get us out. Another term of Labour would have been a disaster for our economy," he said.
"So don't for a moment let Labour get away with it. Don't forget the chaos and fear of 2008. And never, ever trust Labour with our economy again."
Mr Clegg also renewed his commitment to ensuring ordinary voters were rewarded for bailing out the banks, declaring: "I want to see a payback to every citizen."
Earlier in the week the conference adopted plans to look into how to ensure a public share in any profit made from selling the state-owned banks - such as handing out shares.
Directly addressing the tuition fees U-turn, which sparked student riots and split the party's MPs in a Commons vote, Mr Clegg said he had "learned from it" and recognised the damage done.
He told activists that the "most important lesson" was that while the party had done "the best thing it could" it had failed to properly explain the policy or the need to compromise.