* 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) - The world's leading economies will give themselves more wiggle room to meet their own targets for cutting budget deficits rather than risk aggravating a slowdown in many countries, chief among them the United States.
Policymakers from the Group of 20 countries are worried that their target to halve the budget shortfalls of advanced economies by the end of next year might hurt the struggling global economy.
``We will ensure the pace of fiscal consolidation is appropriate to support growth,'' said a draft communique, drawn up for top G20 finance officials meeting on Monday in Mexico.
The target was agreed by G20 leaders at a summit in Toronto in 2010, when the global economy seemed to be on the road to recovery from the financial crisis in the previous two years.
It now looks out of reach for many economies, including the United States, as growth has slowed.
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.
While the United States needs to bring its deficits under control, many G20 countries want it to avert a barrage of tax hikes and spending cuts from Jan. 1 that were penciled in last year to show the country could tackle its fiscal problems.
Those measures, dubbed a ``fiscal cliff'', could push the U.S. economy back into recession unless Congress can reach a deal quickly after the presidential and congressional elections on Tuesday.
``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 eventually fix their fiscal problems over time.
The draft communique said G20 members would ensure that public finances are on a sustainable path, in line with the medium-term commitments made in 2010.
At the Toronto summit, G20 leaders pledged to stabilize public debt by 2016 in most advanced countries as well as halving deficits by the end of 2013.
European policymakers have led the way in pressing the United States to act decisively to steer away from the fiscal cliff which they see as the biggest short-term threat to global growth.
A TICKING CLOCK
``The clock is ticking, the cliff is getting closer and closer. It is a question of less than two 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,'' he told Reuters.
The draft communique said the United States ``will carefully calibrate the pace of fiscal tightening to ensure that public finances are placed on a sustainable long-term path while avoiding a sharp fiscal contraction in 2013.''
A senior European official attending the two-day G20 meeting of finance ministers and central bank governors in Mexico City 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 downside risks are still 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, securing funding for this year's budget in Japan, weaker growth in some emerging markets,'' the draft communique said.
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.