Germany is the latest European nation to join the austerity drive with Chancellor Angela Merkel announcing the biggest spending cuts since World War II.
Welfare payments and unemployment benefits will be cut as part of measures designed to save $US96 billion between now and 2014.
The budget deficit is expected to rise this year to 5% of gross domestic product, one of the lowest in the eurozone.
But Ms Merkel says Germany can't afford to put off the tough decisions.
British Prime Minister David Cameron has also warned of heavy spending cuts in his government's upcoming budget.
Meanwhile, Spanish public sector workers are strking against an average 5% cut in pay.
The cuts are part of a government austerity package aimed at reducing Spain's debt.
