* G20 countries seeking more flexibility on budget targets
* Concerns about possible U.S. tax hikes and spending cuts
* Talks on new targets to continue in early 2013
MEXICO CITY, Nov 5 (Reuters) - Leading world economies plan to give themselves more time to meet their own targets for cutting budget deficits rather than risk aggravating a slowdown in many countries, chief among them the United States, G20 finance officials said.
Policymakers from the Group of 20 countries met on Monday in Mexico and were set to allow the advanced economies among them more flexibility on a target agreed in 2010 to halve their budget shortfalls by the end of next year.
``There may have to be some modification with respect to the deficit targets,'' said Canada's finance minister, Jim Flaherty.
``That may not be compatible for the Americans with their fiscal cliff solution, whatever it is, so there may have to be more time there,'' he told reporters late on Sunday, stressing countries need to show they can fix their fiscal problems over time.
The 2010 target was agreed by G20 leaders at a summit in Toronto at a time when the global economy seemed to be on the road to recovery after the financial crisis in the previous two years. But it now looks out of reach for many economies, including the United States, as growth has slowed.
Indeed, many G20 countries are anxious for the United States to avert a barrage of tax hikes and spending cuts from Jan. 1 that were pencilled in by Washington last year to show the country could tackle its fiscal problems.
Unless Congress can come to a deal quickly after Tuesday's presidential and congressional elections, the U.S. economy could go back into recession.
European policymakers led the way on Sunday in pressing the United States to act decisively to steer away from the so-called fiscal cliff which they see as the biggest short-term threat to global growth.
``The clock is ticking, the cliff is getting closer and closer. It is a question of less than 2 months and accidents can happen,'' a senior G20 official said, although he added the group is confident that Congress will find a bi-partisan solution.
Chile's finance minister, Felipe Larrain, also said there was an assumption that a deal would - and must - be found. ``If we're not able to resolve the cliff, that could be the tipping point for a much more complicated scenario in the world economy.''
The U.S. budget gap surpassed $1 trillion for the fourth year in a row in the fiscal year 2012. The deficit was equivalent to 7.0 percent of the country's economic output.
A senior European official attending the two-day G20 meeting of finance ministers and central bank governors in Mexico City said policymakers were trying to work out a way to reset the targets to match the problems in the economy.
``We'll work on the indicators so that we can keep the Toronto goals but evaluate them in the light of the current challenging economic environment,'' the official said, speaking on condition of anonymity.
Another European official said the G20 would aim to complete a new set of targets when the group's policy makers next meet in Moscow in February.
A draft communique being readied for the G20 policymakers said there were elevated risks facing the global economy, including Europe's crisis and potential problems in Japan.
``Global growth remains modest and risks remain elevated, including due to possible delays in the complex implementation of recent policy announcements in Europe, a potential sharp fiscal tightening in the United States and Japan, weaker growth in some emerging markets and additional supply shocks in some commodity markets,'' the draft said, according to a G20 source.
G20 officials said the wording of the communique on Europe referred to differences among European governments over how to build a banking union, considered an important way to bolster the bloc's shaky financial system, during 2013. France, Spain and Italy have been frustrated with German demands for the new scheme.
Few expect major agreements in Mexico with heavyweights such as U.S. Treasury Secretary Timothy Geithner - expected to stand down after the U.S. elections - European Central Bank chief Mario Draghi, and top Chinese officials skipping the meeting.
The final communique will be published once talks end on Monday.
The G20's consensus of four years ago, which helped stave off the risk of a new depression, has given way to persistent differences over issues such as spending to boost growth and the right pace of belt-tightening to tackle high debt levels.