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Jim Flaherty told a New York audience that he hopes Canada's economic policies will serve as a model for Democrats and Republicans as they work to avoid a year-end fiscal cliff.

In a speech to the Foreign Policy Association, Canada's finance minister expressed hope that with the U.S. election now behind them, politicians of both political stripes in Washington will come together to find a long-term plan to manage government finances.

U.S. President Barack Obama met earlier in the day with Congressional leaders in Washington, with both sides expressing optimism that a deal could be reached in time to avoid the "fiscal cliff" of tax hikes and spending cuts that would otherwise take effect on Jan. 1.

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Mr. Flaherty said the U.S. needs a credible medium-term plan to reduce its fiscal deficit over time and that a political agreement is needed in the short term to provide confidence to financial markets that the economic recovery will continue.

"This is a very serious risk and is not to be taken lightly," Mr. Flaherty later told reporters on a conference call. "It will have rather rapid effects on other economies, including Canada's. We're only in November. Our encouragement to the U.S. authorities has been to deal with it sooner rather than later to avoid slippage not only in the U.S. GDP but slippage in our GDP and that of other countries."

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