Leading world economies pressed the United States
on Sunday to act decisively to avert a rush of spending cuts and tax
hikes, warning that the so-called fiscal cliff is the biggest short-term
threat to global growth.
"If the United States fails to resolve the fiscal cliff it would hit the
US economy hard as well as the world and the Japanese economy, so each
G20 country will urge the United States
to firmly deal with it," Bank of Japan Governor Masaaki Shirakawa said
before a meeting of Group of 20 finance ministers and central bankers.
Unless a fractious Congress can move swiftly to reach a deal after the US elections
on Tuesday, about $600 billion in government spending cuts and higher
taxes are set to kick in from Jan. 1 and could push the US economy back into recession.
With a close US presidential vote looming on Tuesday, as well as
Congressional elections, there has been a delay in action to avert the
fiscal cliff and there is uncertainty about whether Congress can reach a
deal.
European delegates at the G20 meeting in Mexico City were particularly keen for details on the US plan, according to those present at preparatory talks.
Canadian Finance Minister Jim Flaherty said that in terms of short-term
risks to the global economic outlook, the US fiscal cliff outweighed Europe's debt crisis.
"They may not deal with it until the 11th hour and the 55th minute but I
expect that they'll do it just as they dealt with their banks in 2008,"
he told reporters.
South Korean Finance Minister Bahk Jae-wan
forecast the global economy could suffer during the first quarter of
2013 because of uncertainty about the fiscal cliff. Nonetheless, he too was counting on Congress being able to find some
kind of fix, telling Reuters: "I think compared to the euro zone crisis
the fiscal cliff issue is much easier to solve."
A draft communique being readied for the G20 policymakers said there
were elevated risks facing the global economy, including Europe's crisis
and potential problems in Japan.
"Global growth remains modest
and risks remain elevated, including due to possible delays in the
complex implementation of recent policy announcements in Europe, a
potential sharp fiscal tightening in the United States and Japan, weaker
growth in some emerging markets and additional supply shocks in some
commodity markets," the draft said, according to a G20 source.
