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He needs to save the US – and in effect – the global economy from a crippling new recession. So US President Barack Obama has cut short his Christmas holiday in Hawaii to restart talks to prevent America going over the so-called ‘fiscal cliff’.

On January 1, a series of tax hikes and spending cuts worth the equivalent of 450 billion euros comes into effect. The reforms were negotiated last summer in return for raising the limit on how much the US government could borrow.

Tough negotiations between the Republicans and Democrats have intensified since Obama was re-elected in November. US treasury officials have found a way to allow more than 100 billion euros in extra borrowing before hitting the ceiling.

That gives Washington an additional two months to find a solution. The looming crisis and the talk of tax hikes led to a sharp drop in consumer sentiment in December.

There have been reports of disappointing Christmas shopping sales and before the Christmas holiday, US stocks fell, dragged lower by shares in retail companies.

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