U.S. fiscal cliff, Europe's debt woes worry G20

Sun Nov 4, 2012 6:20pm EST
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By Krista Hughes and Julien Toyer

MEXICO CITY (Reuters) - Finance chiefs of leading economies pressed the United States on Sunday to avert a rush of spending cuts and tax hikes that could hurt global output next year, though some countries still saw Europe's debt crisis as the No. 1 danger.

Unless a fractious Congress can move quickly to reach a deal after Tuesday's U.S. elections, about $600 billion in government spending cuts and higher taxes are set to kick in from January 1, threatening to push the American economy back into recession.

"They need to act swiftly on the fiscal cliff and then they will need to put in place a medium-term fiscal consolidation," Australian Treasurer Wayne Swan told Reuters before ministers from the Group of 20 countries gathered for talks.

"There was a strong demand (from Europeans) to be briefed on the fiscal cliff, to get a more detailed idea of how the U.S. may deal with the issue," one G20 official said.

With a close U.S. presidential vote looming on Tuesday, as well as Congressional elections, there has been a delay in action to avert the so-called fiscal cliff and there is uncertainty about whether Congress can reach a deal.

"It's not that we can demand anything from the United States two days before the election. We want them mainly to acknowledge that there is a problem that has to be dealt with. And they did that," said a leading European official.

South Korean Finance Minister Bahk Jae-wan forecast the global economy could suffer during the first quarter of 2013 because of the uncertainty over the so-called fiscal cliff.

Nonetheless, he and other officials said they were counting on Congress being able to find some kind of fix. "I think compared to the euro zone crisis the fiscal cliff issue is much easier to solve," Bahk told Reuters in an interview.   Continued...

Security agents are seen inside of Hyatt hotel in Mexico City November 3, 2012. REUTERS/Edgard Garrido