OTTAWA - Canada swapped its economic blues for a rocking national birthday party that dressed up cities and towns across the country in red and white.

"Together we have faced a challenging year," Prime Minister Stephen Harper told tens of thousands of people who thronged a huge stage Wednesday on Parliament Hill and packed the street below.

But Canadians are "a strong and resilient" people poised for better times ahead, he said to cheers from the small sea of waving Maple Leafs.

"We will soon have a chance to showcase Canada to the world," Harper said of the 2010 Olympic Winter Games in Vancouver-Whistler.

Gov. Gen. Michaelle Jean, radiant in yellow, emerged from an open landau to the opening concussions of a 21-gun salute and shouted greetings from admirers.

She drew some of the loudest applause of the day's traditional noon-hour show as she ended her speech with: "Happy Birthday Canada! I love you!"

The Governor General wore silver earrings and a matching necklace in the shape of an ulu - the traditional all-purpose knife used mainly by Inuit women. It was just such a knife that she used to help carve a freshly killed seal and taste its heart on a trip to the Arctic in May.

Her gesture, widely seen as open support for the Inuit sustenance hunt, made headlines around the world.

Jean warmly chatted with revellers who showed off the Maple Leaf on T-shirts, sequined bags, flip-flops and oversized hats.

As the Snowbirds and CF-18 fighter jets roared overhead, many people literally wrapped themselves in the flag and strained over barricades to shake hands with Harper or the Governor General.

Harper told the crowd that "142 years ago today the most peaceful, prosperous and enduring democracy the world has ever known was born. I speak of course of your country, of my country, of our country, Canada."

Harper said it's a day to reflect on the wisdom of ancestors who built the country, and to give thanks to those "who continue to defend our values and our interests here and around the world - the brave men and women in the uniform of the Canadian Forces."

Perhaps no one was more thrilled to shake Harper's hand than Nadia Ayar, 38. She moved to Canada from Iraq 10 years ago and said she wouldn't have missed the chance to celebrate.

But thoughts of her family still back in the violent chaos of her home country are never far off.

"I remember them very much today especially," she said. "It's mixed feelings. I enjoy being in Canada and I love Canada. Canada did a lot for me. But I always have some sad moments regarding what's happening in my country."

Luke Smith, 23, a Starbucks manager in Ottawa, took in the carnival atmosphere decked out in a Maple Leaf top hat.

"Clearly, this is the best place to be in Canada right now. There's nothing better than being on Parliament Hill on Canada's birthday - all the people and just everything there is to see. And everybody is just in such a good mood."

The prime minister planned to spend the rest of the day at his official country retreat at Harrington Lake in Quebec. A barbecue with family and friends was on the agenda - along with an innovative way to keep cool in a humid heat that rose above 25C.

Rain held off during the official ceremony but a downpour drenched the crowds in mid-afternoon.

"My wife, the last couple of years, has set up this big tarp and everybody goes rolling down the hill into the lake," Harper said. "It's kind of a water slide we put up there."

Asked if there would be footage of him trying it out, the prime minister laughed and said any pictures "will be carefully censored."

Harper's main political rival, Liberal Opposition Leader Michael Ignatieff, apparently had second thoughts about donning an outlandish bit of Canadiana in Edmonton.

He took part in the annual Old Strathcona Silly Summer Parade featuring unique headwear.

Compared to the daily question period "it's a lot sillier and a lot more fun," he said. "I just want to be out in the streets with Canadians today and what better (way) than wearing a silly hat? I haven't got my silly hat yet, but we're going to get a really silly one."

Ignatieff looked dubious, however, when a large, floppy red-and-white topper emblazoned with maple leaves was presented.

He walked off bare-headed as the parade began.

"Mrs. Ignatieff said 'No,"' a Liberal staffer explained.

In Vancouver, 61 new Canadians from 34 countries took the Oath of Citizenship during a waterfront ceremony.

Vancouver mayor Gregor Robertson welcomed the boisterous crowd and said Canadians, old and new, have good reason to be proud.

"It speaks volumes about our country that the term Canadian is considered a compliment right around the world."

Maikel Febles, who moved to Canada from Cuba five years ago, said the ceremony was an emotional one.

"It feels amazing. It's a long road, coming to Canada.

"I'm looking forward to fulfilling all my duties as a Canadian citizen."

In Halifax, 3,000 people turned out in the rain and fog to watch the National Band of Naval Reserve and the International Tattoo choir perform. There was also a flyby by 12 Wing Shearwater.

Dr. Otilia Teodorescu, 35, a family physician who immigrated from Romania and became a Canadian citizen in 2005, said it was a very touching experience to bring her parents, who are visiting Halifax for the first time, to the Citadel.

"My emotions are high. You feel the patriotism. Everybody feels like they know each other. It's a very friendly feeling. It's very touching," she said

Celebrations were muted in Montreal as they competed with the International Jazz Festival and Quebec's annual moving day when rental leases end.

Some 5,000 people hit the city's downtown streets to watch the Canada Day parade. Afterwards, a lineup of about 2,000 waited to sample a giant red-and-white cake that has become a post-parade tradition.

Montreal secretary Najla Syed, 35, was almost as excited as her three kids to get a slice after a half-hour wait.

"We have a lot of fun here. My kids, they wait for July 1."

A small group of sovereigntists countered with a peaceful protest in Montreal. And in Quebec City, Olympic skier Jean-Luc Brassard asked the crowd to put aside politics and focus on celebrating Canada as a whole.