IMF chief says US faces fiscal tightening

Finance officials from the world's largest economies called on countries to reject protectionism and currency manipulation despite a raft of economic problems that include the US deficit.

Meeting in Mexico City one day before the US elections, the G-20 finance ministers issued a statement saying the United States faces "a potential sharp fiscal tightening."

Other delegates at the meeting expressed similar concerns.

International Monetary Fund Managing Director Christine Lagarde called the economic situation "difficult".

She highlighted the "fiscal cliff and the debt ceiling" as key issues the US needed to address.

The "fiscal cliff" refers to the package of major tax rises and spending cuts scheduled to hit the U.S. unless Congress acts by 1 January, 2013.

The European financial crisis and the U.S. deficit dominated the G-20 agenda.

European officials said correct steps to solve Europe's crisis were being undertaken.

"The tail risks have decreased dramatically in the euro area due to important policy decisions and the decisive action since the summer," European Commissioner for Economic and Monetary Affairs Ollie Rehn said.

But he warned solving the financial problems in Europe was not enough.

"Risks do also stem from the US 'fiscal cliff', the high level of commodity prices, and a slowdown in emerging economies," he added.

The G-20 brings together the world's principal economies and important emerging ones, including the United States, the European Union, China and Brazil.