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Prime Minister Stephen Harper takes the stage Monday, May 2, 2011 in Calgary as he celebrates the Conservative party majority election victory.Ryan Remiorz

Stephen Harper's Conservatives face crucial decisions that will shape the country's business landscape, with new freedom to push their agenda on touchy issues like foreign investment and to cut spending.

Even as Mr. Harper pledged Tuesday to steer clear of radical change, investors and businesses in Canada and around the world are waiting to see how his government handles a number of hot files, now that the Conservatives won't face voters for at least four years.

In the coming weeks, the government will pass a budget that tracks closely to the one rejected by opposition parties six weeks ago, including targeted tax breaks for families, the last leg of corporate tax cuts, and a plan to eliminate the deficit by 2014. Less clear, however, is how it will approach a series of policy decisions that come at a key point in the recovery - including how it plans to cut spending after the global recession forced years of record shortfalls.

Mr. Harper has already shown that his openness to foreign investment has limits, blocking two proposed takeovers since 2008, including last year's hostile bid by BHP Billiton Ltd. to acquire Potash Corp. of Saskatchewan Inc.

After the Potash decision, Industry Minister Tony Clement promised the government would clarify its position on foreign takeovers, but never followed up. That left the impression the decision had more than anything to do with the Conservatives' political fortunes in Saskatchewan, where Premier Brad Wall had galvanized public opposition to the deal. (The Conservatives won 13 of 14 seats in the province Monday night.) The contentious merger proposal between the owners of the Toronto and London Stock Exchanges is in limbo as the Ontario government figures out whether it can block the deal. Assuming the province doesn't, the government will have to make a decision on that deal this summer.

But business leaders say global investors will want clarity on the bigger picture of foreign investment now that Mr. Harper is less beholden to opposition parties in the House.

``I would imagine this helps to take away some of the political factors that probably weighed in the Potash decision," said Jay Myers, president and CEO of Canadian Manufacturers & Exporters. ``I would hope that with a more stable government in place it does remove some of the partisan and political calculations out of some of these major policy decisions."

The same could apply to trade, an area where a long-sought-after agreement with the European Union has eluded Canadian negotiators, primarily because of a supply-management system that protects dairy farmers in Quebec. Having been consigned to the political wilderness in the province, the Conservatives might seek to bolster their free-trade credentials by taking the steps needed to satisfy EU negotiators.

``Liberalizing our own rules would be helpful," said Finn Poschmann, vice-president of research at the Toronto-based C.D. Howe Institute. "No time like the present, because there are some debates that need to take place, some legislative and regulatory reforms that need to be addressed, and it will take time to get it right." Having a solid mandate also paves the way for the Tories to open the telecommunications sector to greater foreign ownership, which the Conservatives have argued will mean more competition and cheaper prices for consumers.

Also, next year the government holds an auction for wireless licences covering the highly valuable 700 megahertz frequency, a type of signal that travels farther and penetrates buildings more easily than others. In 2008, the Conservatives set aside licences for new players, preventing wireless incumbents from outbidding their would-be new rivals. The big three players don't want newcomers to have that advantage this time, but newcomers like Wind Mobile argue Bell Canada, Telus Corp. and Rogers Communications Inc. are already "spectrum squatting" on licences they've accumulated over the years.

The government also will spend part of this year deciding whether to simply renew or tweak its inflation-targeting agreement with the Bank of Canada.

The one issue that could eclipse all others, though, is how to balance Ottawa's books without damaging an economy that now lacks the rampant consumer spending that helped Canada outperform its peers.

The Conservatives have been vague on how they plan to go about this.

Mr. Harper has said eliminating the deficit will be achieved through a review of government operations to find $4-billion in annual savings through attrition and an overhaul of government computer systems. The beefed-up mandate gives the Conservatives leeway to slash programs and civil servants, should they choose to do so, without having to worry about justifying the cuts in an election campaign months later.

"I'm skeptical the projected cuts can be obtained through attrition and cutting back on paper clips," said Kevin Milligan, economist at the University of British Columbia, who projects cutbacks to civil servant wages, benefits or pensions along possible layoffs. ``With an election not for another four years, the government is likely going to move quickly to make those cuts happen." Many economists argue the top priority should be maintaining Canada's advantage in financial markets over governments whose profligacy threatens to undercut their ability to borrow money at affordable rates - even if that means sacrificing some economic growth.

``Whether they can [balance the budget]right to the penny isn't something that markets are so concerned about as they are the general direction," said Derek Holt of Scotia Capital. ``The bias should be to sacrifice what you have to, in order to remain on the path to fiscal repair … in a way that retains Canada's fiscal advantage."

With files from reporters Steven Chase, Karen Howlett, Barrie McKenna and Iain Marlow

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