G20 warns US over deficit amid fears it is the next crisis to hit
America has been given a rare warning from G20 countries not to botch its own deficit-cutting measures amid fears that the world's biggest economy could fall off a "fiscal cliff" next year.
11:48PM BST 19 Jun 2012
11 CommentsThe warning came at the end of a fraught two-day summit in Mexico dominated by Europe's debt crisis. While the world's most powerful economies urged European governments to do more to end their crisis, the rebuke to The White House reflects increasing concern that America's struggle with its own $15trillion of debt will be the next to hit the world economy.
Efforts by President Barack Obama and Congress to agree on a grand plan to cut the country's deficit have so far failed.
A series of short-term compromises have left the US facing $1trillion in spending cuts at the start of next year. Federal Reserve chairman Ben Bernanke has warned that the cuts, alongside the expiration of tax cuts first introduced by George W. Bush, leave the US facing a fiscal contraction that could plunge the country back into recession.
The G20 urged the US to "calibrate the pace of its fiscal consolidation by avoiding a sharp fiscal contraction in 2013 while insuring that its public finances are placed on a sustainable long-run path," according to the communique.
With the presidential election happening less than two months before the tax increases and spending cuts are due, financial markets are fearful that Congress will fail to reach an agreement to delay some of the measures.
