WASHINGTON - President Barack Obama said Friday that Democrats and Republicans needed to make "tough compromises" in order to overcome divisions over deficit reduction and avoid the fiscal cliff.

Opening talks aimed at avoiding a year-end tax and spending crunch that could send the economy back to recession, Obama welcomed congressional leaders from both parties at the White House, saying Americans want action from them.

"Our challenge is to make sure that we're able to cooperate together, work together, find some common ground, make some tough compromises, build some consensus to do the people's business," Obama said.

The American people "want to see that we are focused on them, not on the politics here in Washington," he said.

"My hope is this is going to be the beginning of a fruitful process, that we're able to come to agreement that will reduce our deficit in a balanced way, that we will deal with some of these long-term impediments to growth."

Obama stressed the argument he made in a press conference Wednesday that the priority is to make sure huge tax hikes slated to hit on January first, potentially sucking $400 billion out of the economy, don't happen.

But he did not repeat his call that tax increases for the richest two per cent of Americans go ahead -- an issue that Republicans have rejected.

"We have to make sure that taxes don't go up on middle class families and that our economy remains strong and creating jobs, and that's an agenda that Democrats and Republicans and Independents, people all across the country share," he said.

For more information on how the fiscal cliff affects manufacturers and the economy, click here.

Copyright Agence France-Presse, 2012