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Fiscal Cliff: Differences Remain As Deadline Looms

(c) Sky News 2012

European stock markets have opened nervously as the clock ticks down to a New Year deadline for a deal to prevent the US falling over the 'fiscal cliff'.

A series of costly tax rises and spending cuts kick come into force as 2013 begins in America, unless Congress and the White House can agree measures to stop them being implemented.

The 'fiscal cliff', as it came to be known, was designed to help tackle the country's huge debt pile in the event squabbling politicians could not do a deal beforehand to ease the burden.

The fiscal cliff worries investors as economists fear the pain of implementing them will tip the US back into recession and therefore hit world demand and growth prospects.

In London, the FTSE 100 (FTSE: ^FTSE - news) opened 0.4% lower at the start of a trading day that will see the market close at 12:30 GMT because of the New Year holiday.

The CAC 40 in France is also on a half day and started trading fractionally down.

While Germany's DAX (Xetra: ^GDAXI - news) is closed, the Dow Jones (DJI: ^DJI - news) will be open for business on Wall Street later as Democrats and Republicans begin their final push for a deal to avert the fiscal cliff.

Despite feverish work behind closed doors by aides to both leaders in the Democrat-controlled Senate on Saturday, a deal palatable to both sides remained elusive.

US Senate Majority Leader Harry Reid said he had has made a counter-offer to a Republican proposal put forward on Saturday but later admitted "serious differences" remain.

The two sides have reportedly moved closer on tax increases while Republicans have indicated they could withdraw a contentious proposal to slow the growth of social security retirement benefits.

Senate Republican leader Mitch McConnell said he had asked Vice President Joe Biden to become involved in a last-minute effort to reach an agreement.

He added that there was no single issue blocking an agreement but that "the sticking point appears to be a willingness, an interest, or courage to close the deal".

"I'm willing to get this done, but I need a dance partner," Mr McConnell said.

Both the Senate and the House of Representatives would have little time to debate and then pass a deal that has eluded the White House and Congress for weeks.

President Obama, who called congressional leaders to the White House on Friday, addressed the crisis once more as he appeared on NBC's Sunday morning talk show Meet the Press.

The President said Republicans were unwilling to see tax rates raised for the richest taxpayers.

"They say that their biggest priority is making sure that we deal with the deficit in a serious way," Mr Obama said.

"But the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected.

"That seems to be their only overriding, unifying theme," he added.

If a compromise can be found, the two parties will then decide whether to put it to the vote on New Year's Eve in the Senate and then the Republican-controlled House of Representatives.

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