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Recession Looms If ‘Fiscal Cliff’ Not Solved: Fink

Listless markets are responding to the increasing possibility that U.S. lawmakers will not prevent a tumble down the "fiscal cliff," BlackRock CEO Larry Fink told CNBC on Friday.

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The summer surge that pulled stocks to multi-year highs appears to have faltered amid growing fears about the global economy, and the chance the U.S. economy will be undermined by a raft of tax increases and public spending cuts early next year. (Read More: What Investors Can Do Until Stocks Rally Again.)

For that reason, Fink told CNBC's "Squawk Box," investors and businesses are reacting to the fiscal cliff uncertainty by sitting on their wallets.

"CEOs today are pensive about what to do next. They're just sitting back, they're not hiring as much [and] they're probably not spending as much," the BlackRock chief said. "There's a deceleration in the economy, and we all start feeling it."

Unsteadiness in the global economy and the fiscal cliff hand-wringing "are reasons to take some profits in the short-term, and we have to look now and see how these things are going to be resolved," Fink said.

If the U.S. fiscal problems are "resolved in a broad sense, in a quick manner, then the market's going to resume its rally," the fund manager said. "If it's another kick the can down the road … then I think we're going to have a recession in the first quarter and … markets are going to be quite unsettled." (Read More: Jamie Dimon: CEOs Already Cutting Back Due to 'Fiscal Cliff'.)

On Friday, the Commerce Department reported that the economy expanded at an annualized rate of 2 percent in the third quarter, a pace that beat most analysts' expectations. Yet the growth was boosted primarily by a burst of consumer and government spending — both of which may be adversely impacted if the automatic tax hikes and spending cuts take effect early next year.

Making matters worse is the pitched battle being waged for the White House. With Election Day a little more than a week away, neither major party has any incentive to negotiate on an issue that is starting to prompt both Wall Street and Main Street alike to break out in cold sweats.

"We're starting to approach the election. We have the uncertainty about who will be the president and how the fiscal cliff will be resolved," Fink said.

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