This week we had a wave of protests in Spain over the cuts in expenditure ann-ounced by the Zapatero government.

This is a repetition of the protests like we have seen in Greece some weeks ago and is a prelude to protests in other countries. The point is several EU governments have run up public sector deficits in an effort to combat the meltdown in the financial markets and the international recession to a level that is unsustainable. The EU 27 governments have a total accumulated debt of nearly 80 per cent of the Union's annual economy.

Moreover, the public sector deficit as a percentage of the gross domestic product is way above the three per cent level established in the Growth and Stability Pact and the total for the 27 member states is expected to reach 5.6 per cent for 2010.

Thus the only answer that can be given in response to this situation is a dose of expenditure cuts in an effort to remedy the situation. Thus the Italian government is cutting expenditure by €26 billion over two years; the Spanish government is cutting expenditure by €15 billion also over two years; and the Greek government is cutting expenditure by €30 over three years on top of previously announced cuts.

Maybe one of the best ways of describing public sector coffers in a number of countries was given to us by the chief secretary to the Treasury of the Brown government, who left a handwritten note for his successor, saying: "The money has finished". In the past weeks this has led most governments to announce austerity measures to bring public finances back under control.

EU governments are hoping that by slashing their budgets, they can defend the euro and the sterling against attacks, they can prop up the stock markets, and they can discourage speculation on sovereign debt, which almost made Greece go bust.

On the other hand, trade unions are not willing to accept such measures, claiming that cuts in public expenditure are going to lead to less and lower quality services as well as job losses.

They claim that the working class is having to pay for a crisis that they did not cause. The two positions seem irreconcilable, especially since there is merit in the argument of the trade unions and there is also merit in the cuts remedy that is being implemented by several governments.

And what about little Malta? Any time soon, the government shall be publishing its pre-Budget document that gives us an indication of the performance of the Maltese economy during this year and of the main challenges that we expect to be facing in the coming year.

I believe we would all like to hear that there will be no expenditure cuts in 2011; but I do not believe that we can live in a fool's paradise.

No matter how resilient the Maltese economy proved to be during the international recession, public sector funds were still spent to support employment, to strengthen the social security net for those who are most vulnerable, and to promote new investment.

Our level of accumulated public debt is eight percentage points below the EU average. Countries such as Ireland, Germany, France, Italy and UK are all in a position worse than us.

In terms of the projected 2010 deficit as a percentage of the gross domestic product, we are nowhere the levels of countries such as Ireland (11.7 per cent), the UK (12 per cent), Spain (9.8 per cent), France (eight per cent) and Portugal (8.5 per cent). However, we are still above the three per cent level that we should be at.

Some might ask whether it was worth joining the EU to be faced with all these challenges. I believe that if we had not joined the EU, our situation would have been much worse. We should also be thankful of the policy adopted by the government in the last 20 years or so, namely that it raised loans not from foreign sources but from local sources.

And we need to appreciate that our banking system could withstand the challenge of the meltdown in the international financial markets. We also need to appreciate that the jobless queue is shorter than that of other countries. All this is attributable to good governance.

On the other hand, we cannot escape the fact that the cuts remedy needs to be applied to us as well; but the dose does not need to be as strong as that required by other countries. The main challenge that the Minister of Finance has to address is where these spending cuts have to come from.