Fiscal Cliff Talks Heat Up This Week

Morning Business Memo:

The fiscal cliff is a threat to the economy and the stock market. The Dow Jones index, S&P 500 and other averages are coming off one of their worst weeks of the year with a drop of more than 2 percent. Economists have issued dire warnings about a possible recession and a new slump for the jobs market if the cliff isn't averted before the January 1 deadline.

President Obama plans to go beyond the Beltway to build support for his approach to fix the budget with tax hikes and spending cuts. Instead of confining itself to private talks with Republican leaders, as it did last year during the debt ceiling crisis, the White House is set to launch a public campaign. With Washington lawmakers back in D.C. this week discussions are likely to pick up speed. One possible compromise suggested by Republicans would increase revenue from wealthy taxpayers by cutting deductions rather than rates.

The US economy is getting no help from overseas. Japan today says its output shrunk 3.5 percent in the third quarter. The world's third-largest economy suffered as a territorial dispute with China hammered exports already weakened by feeble global demand. The new numbers are a reversal from the first half of the year, when Japan outperformed other G-7 countries.

Greece's Parliament approved a 2013 austerity budget, an essential step in Greek efforts to persuade its international creditors to unblock a vital rescue loan installment. Finance ministers from the 17 euro currency countries are expected to debate Greece's economic reforms later today at a meeting in Brussels.

The US is set to become the world's biggest oil producer within the next 5 years. The International Energy Agency makes the forecast in its latest report. US production is soaring thanks to the shale oil drilling revolution

Richard Davies Business Correspondent ABC NEWS Radio