NEW YORK - NEW York Mayor Michael Bloomberg warned on Sunday that New York must make 'tough choices', including spending cuts and layoffs, to weather growing economic difficulties.

Mr Bloomberg said in his weekly radio address that the 'ongoing financial crisis' means the economy is 'stalling and our tax revenues are falling'.

The US subprime mortgage meltdown and ensuing collapse of major financial institutions on Wall Street, a key source of city taxes, is responsible for a US$4 billion (S$6 billion) budget deficit through to June 2010, Mr Bloomberg said.

Mr Bloomberg announced last week US$1.5 billion in spending reductions and shrinking of the city workforce by 3,000 positions.

Most of these job cuts will come through attrition, but 200 people will be laid off at the housing department and 300 from the education department.

A property tax cut due to expire next July will instead expire January 1, Mr Bloomberg said.

'Even with all these measures, we're not out of the woods,' he added. 'I know that many families across the city are already struggling with the effects of the economic downturn. And there are likely to be more tough times ahead for New York.'

Mr Bloomberg's gloomy prognosis follows New York state Governor David Paterson's warning last month that the state will have a US$47 billion budget shortfall over the next four years.

New York state relies heavily on the city and particularly on taxation of the Wall Street finance industry, which is in severe turmoil.

In ordinary times, about 20 per cent of state revenues derive from Wall Street, growing to 30 per cent in the fourth fiscal quarter, when bonuses are paid out. -- AFP