The world’s leading economies have pressed the US and Europe to swiftly resolve their fiscal challenges, warning that they threaten to harm global growth.

Finance ministers and central bankers from the Group of 20 leading developed and emerging nations vowed to do “everything necessary” to strengthen the world economy, reduce financial market volatility and generate jobs.

The two-day talks in Mexico City focused on the euro zone’s relentless debt crisis and the looming “fiscal cliff” in the United States – a set of automatic spending cuts and tax hikes that could impact global growth if they go in effect in January.

“Global growth remains modest and downside risks are still elevated,” the G20 said in a final communiqué.

The statement cited “possible delays in the complex implementation of recent policy announcements in Europe” and a “potential sharp fiscal tightening in the United States.”

But the finance chiefs also voiced concern over Japan’s own fiscal troubles, as well as slowing growth in emerging nations and “additional supply shocks” in some commodity markets.

G20 officials urged the winner of Tuesday’s US presidential election, pitting incumbent Barack Obama against Republican Mitt Romney, to rapidly act to reach a deal with Congress after the vote.

“The US leadership needs to address quickly the so-called ’fiscal cliff,’” said IMF Managing Director Christine Lagarde.

She warned that there were “clearly factors of uncertainty not only for the US economy, but also for the global economy, given the size of the US economy.”

“Whoever is going to be elected or re-elected tomorrow will be faced with that challenge,” Lagarde said.

The G20 statement said Washington will “carefully calibrate” the pace of its fiscal tightening so that public finances are placed on a “sustainable long-run path while avoiding a sharp fiscal contraction” next year.

Spanish Economy Minister Luis de Guindos warned that the US fiscal cliff hung over the world like the “Sword of Damocles.”

Since a G20 summit in June, the IMF slashed its 2012 global growth forecast to 3.3 per cent, euro zone unemployment rose to a record 11.6 per cent in September and growth decelerated in emerging nations.

(This article was published on November 6, 2012)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.