G20 ministers warn US fiscal cliff could cause global crisis

Leading world economies are pressing the United States 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.

Unless a fractious Congress can move swiftly to reach a deal after the US elections today, about US$600 billion in government spending cuts and higher taxes are set to kick in from January 1 and could push the US economy back into recession.

"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 on Sunday.

With a close US presidential vote looming today, 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.