The German goverment say they're "confident" that US President Barack Obama and congressional leaders can reach a deal to avert next year's "fiscal cliff" of tax hikes and spending cuts.

Obama cut short his Christmas break this week to fly back to Washington to revive last-ditch talks on the budget.

If he and Republican lawmakers don't reach an agreement on how to tackle the US's ballooning deficit, tax cuts enacted under former president George W. Bush will expire on January 1 and automatic spending cuts will then take effect.

Experts say this will most likely throw the world's leading economy into recession.