WASHINGTON, US - LEADING rich nations will have limited scope to cut taxes or increase government spending to boost their economies because of their public debt levels, the head of the OECD said on Saturday.

The US has significantly increased its debt through measures to combat the financial crisis this year and Japan borrowed extensively during the 1980s and 1990s when it faced its own banking crisis.

'Long-term fiscal sustainability is becoming an important issue with the US public debt set to rise to internationally high levels,' said the head of the Organisation for Economic Cooperation and Development, Mr Angel Gurria.

On Japan, the secretary general said fiscal policy has 'little room for manoeuvre ... where the fiscal action of the 1980s and 1990s has left a legacy of already excessive public debt'. In Europe, 'the room for an expansionary fiscal stance is limited and in many countries non-existent'.

The International Monetary Fund has warned the global econony faces a major downturn, which could normally be countered by fiscal stimulus from governments either through tax or spending policies.

The OECD is a Paris-based, publicly funded body that issues research and policy advice to its 30-strong membership of democratic, industrialised nations. -- AFP