Much of the developed world is charging ahead with austerity plans that will drag on the world economy next year, with bond market vigilantes beating the drum for ever-more belt tightening.

Data on Tuesday is seen showing the euro zone economy grew a modest 0.2 percent in the third quarter, although European policymakers warn the region could soon slip into recession.

Credit is tightening for parts of the region as it struggles to contain a sovereign debt crisis that has already forced Greece, Portugal and Ireland into bailouts. Now, even relatively strong economies like France are pushing new measures to rein in spending.

Fiscal austerity winds are blowing, said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. This is going to act to slow down growth.

Global economic expansion will likely cool to 3.2 percent in 2012 from 3.9 percent this year, according to a recent projection by the Conference Board, a private U.S. firm.

That outlook could darken considerably if Europe's travails worsen.

Italy, the latest country in the market's cross-hairs, faces a key test of investor confidence on Monday with a government bond auction, following austerity measures agreed by lawmakers.

But even if investor confidence in Italy improves, attention will merely shift to other rich nations that are up to their ears in debt.

CLOCK TICKING ON BUDGET

Lawmakers in the United States, which can still borrow cheaply in part because of fears that Europe is falling apart, are closing in on a deadline to identify $1.2 trillion in budget savings.

A deal cutting long-term spending by even more could give U.S. lawmakers room to extend unemployment benefits and some tax cuts to help keep the recovery on track. But with the 2012 presidential election looming, few on Wall Street expect much to come of the process.

Economists at Goldman Sachs reckon tighter fiscal policy will shave at least 1 percentage point off of U.S. economic growth in both 2012 and 2013.

Indeed, the pressure to cut spending deeply will only rise over the coming years, and investors could eventually balk at financing U.S. debt cheaply.

The International Monetary Fund estimates the U.S. government's gross debt will exceed the size of its economy this year, and will rise to 115 percent of GDP by 2016.

The bill collector is coming, Senator Tom Coburn, a Republican active in the budget debate, told the Reuters Washington Summit last week.

For now, the United States is enjoying a reprieve because the world is focused on whether the 17 members of the euro zone will stick with the single currency.

Coburn thinks the United States has at most two more years before bond markets demand punitive interest rates on its debt. At that point, he said, We will be Greece.

Putting off deep fiscal reform only raises pressure on rich countries' central banks to pick up the slack in order to stave off a deeper crisis.

If a new government and budget plan in Italy do not satisfy markets this week, the European Central Bank will come under heavy pressure to buy Italian bonds to keep the country -- the euro zone's third largest economy -- from needing a bailout that the region cannot afford.

The U.S. economy has been performing relatively more strongly, and retail sales data on Tuesday is expected to indicate that consumer spending held up at the start of the fourth quarter.

But with government spending possibly falling in the new year, the first months of 2012 could be crunch time.

U.S. inflation data on Wednesday is expected to show prices held steady in October, while the 12-month increase likely cooled to 3.6 percent from 3.9 percent.

With inflation expected to cool throughout next year, the Federal Reserve could have more room to stimulate growth.

However, it is far from clear that even the mighty Fed would be able to ward off the bond vigilantes should the market turn on the United States.

The lesson we've had since the 1980s is that markets are bigger than governments, said Bryan Taylor, chief economist at Global Financial Data, a California firm that specializes in historical data going back to the Middle Ages.

They used to try to manipulate the exchange rates and they gave up on that. Now they are trying to do the bonds, and inevitably they will lose.

(Editing by Leslie Adler)

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