London, Feb. 25: After the fiscal initiative to clamber out of recession comes the pain of cutting down on spending to save the economy.

That’s the lesson from the European financial crisis, which finance minister Pranab Mukherjee will probably have at the back of his mind as he rises tomorrow to present a budget, which hopes to cut down deficit and raise more finances.

The euro has been under attack from speculators who fear the currency is being pulled down by debt-ridden Greece, Spain, Portugal and Ireland.

These European laggards have run up huge fiscal deficits while trying to wriggle out of a recession on top of huge debt burdens. They now need costly bailouts from richer neighbours to set their economies in order.

High deficit, mounting inflation and unemployment are threatening economic stability in large swathes of the Eurozone, or the region that accepts the euro as a currency. This could erode the value of the euro in the years ahead, threatening lifestyles all over Europe.

Britain, which is not part of the Eurozone, is not in a better shape either.

Last night, Britain’s shadow chancellor George Osborne made it clear that the country would face “savage” public spending cuts and a loss of economic sovereignty unless a beginning to reducing the record £178-billion fiscal deficit is made this year.

“Those who say we should simply ignore the markets are siren voices, luring us on to the rocks,” he said.

Though the Labour Party and the Conservative Party are pitched in a war of words over public policy, both agree there is a need to cut down UK’s high fiscal deficit of over 11 per cent of the gross domestic product or face a situation where the country may lose its AAA credit.

Despite vague promises of a bailout by Germany, Greece is still seen as a basket case by many.

“The country has spent beyond its means … its story of veering towards bankruptcy and threatening the stability of the euro is one from which every nation needs to draw a lesson,” said Christopher J. Green of the Loughborough University, an expert on global capital flows.

India seems to have taken this lesson. The economic survey released today said the government would like to cap total federal and state debt at 68 per cent of GDP by 2014-15.

At present, the combined central and state debts run at 80 per cent of GDP — not far behind the 120 per cent public debt run up by bankrupt Greece.

The debt level is almost four times that of China’s, according to the figures of the International Monetary Fund.

Many pundits in India as well as abroad, feel the Indian government will be forced to partially roll back stimulus measures to cut down its fiscal deficit. India plans to bring down its fiscal deficit to 3 per cent of GDP from a current high of 6.5 per cent by March 2014.

A substantial portion of this will be achieved by rolling back some Rs 40,000 crore tax sops that the country had announced last year as a way of getting out of an economic slowdown, brought about by the global recession.