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As 'fiscal cliff' looms, stock markets shudder at economic 'uncertainty'

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But how such a deal will shape up, in the current partisan climate, remains unclear. Will Mr. Obama seek to hold firm on his view that an extension of Bush-era tax rates should exclude the rich? Will resistance to tax hikes within the Republican-controlled House stymie efforts to strike a “grand bargain” that mitigates the cliff in the near term while also reducing long-term deficits?

The analysts at Capital Economics in Toronto predict that Obama “will struggle to garner bipartisan support for a more comprehensive agreement [on] how to put the nation’s finances back on a sustainable path.”

Obama used his victory speech, delivered in the wee hours of Wednesday morning, to focus above the partisan fray – on things that unite Americans rather than divide them.

With the cliff just weeks away, however, bargaining on the issue is moving immediately into high gear.

Senate majority leader Harry Reid (D) said Wednesday that any solution should include higher taxes on "the richest of the rich," but also that he’s “not for kicking the can down the road" into next year.

Delaying the issue until next year could be hazardous to an economy that’s already fragile, growing at an annualized pace of 2 percent or perhaps a bit less. Current forecasts, which assume some resolution of the "cliff" problem, call for similar tepid growth in 2013.

Wednesday’s stock market weakness was also fueled by reminders that the economic clouds aren’t limited to the US. Traders were also listening as European Central Bank President Mario Draghi spoke of economic weakness in the wider euro zone.

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