Debt Crisis: Cyprus rating slashed as EU rules out debt haircut 10.00 As if it wasn't already clear that Germany is reluctant to enter tighter fiscal union, its central bank governor and ECB governing council member Jens Weidmann drove the point home in an interview with magazine Wirtschaftswoche. He said lack of political will to relinquish sovereignty would hold up progress to fiscal union and warned against the ECB taking on too much risk in crisis-stricken countries, saying it should "interpret its mandate narrowly and not even put itself in such a predicament in the first place." I do not see the big leap toward fiscal union. If responsibility and control are not aligned, it would undermine the currency union. Jens Weidmann, Bundesbank governor and member of the ECB governing council, is a vocal critic of closer fiscal union in the EU 09.44 The European markets have opened to a tumultuous start this morning, as fears of US budget talk failure grow after Republicans cancelled a vote on higher taxes for top earners. The FTSE 100 tumbled 0.83pc, the DAX fell 0.51pc, the CAC in Paris slumped 0.54pc, the IBEX in Madrid was down 0.40pc, and the MIB in Milan fell 0.63pc. 09.16 Meanwhile the IMF has warned talks between Cyrpus and its international lenders are unlikely to resolve this year. The crisis-ridden nation requested a bail-out in June and is thought to need around €17.5bn - almost equal to the island's total GDP of €17.97bn. 08.30 Ratings agency Standard & Poor's has downgraded Cyprus' debt further into junk status, by two notches to CCC+, saying it viewed "the risk of a sovereign debt default as considerable and rising." Meanwhile, hopes for a Greek-style 'debt haircut' have been dashed by comments from Eurogroup leader Jean-Claude Juncker, who dismissed the posssibility of writing down Cypriot debt as it would risk the credibility of the eurozone. Elsewhere, European Central Bank executive board member Joerg Asmussen also said a debt writedown was "out of the question." S&P said in a statement: With the government's financing options increasingly limited --coupled with what we view as the hesitant attitude of Cyprus' eurozone partners toward sharing the cost of a severe banking crisis -- we view the risk of a sovereign debt default as considerable and rising. Speaking to German radio station Deutschlandfunk, Mr Juncker said: I expect that a haircut will not be part of the instruments that will be used with priority [in Cyprus]. I want to exclude that possibility from my side. Speaking on German television, Mr Asmussen said: There is no question of a haircut for Cyprus now because we have only a preliminary financing need for th ebanks in Cyprus. We will get the final numbers in mid-January. 07.00 In this morning's Telegraph, Ambrose Evans-Pritchard asks whether Spain would do well to leave the euro. Spain has made dramatic strides in cutting labour costs and reviving exports since the debt crisis erupted, turning the country into the new poster-child of Europe's austerity regime. Fresh data from the OECD show that Spain has narrowed the gap in "unit labour costs" with Germany by 5.5pc over the past year alone. It has clawed back 4.6pc against France and 6.6pc against Austria since late 2011, as it slashes pay and pursues a scorched-earth policy of "internal devaluation." Luis Maria Linde, the Bank of Spain's governor, says that within two years the country will have recovered "almost all" the ground lost during the first disastrous years of euro membership. The total gain in competitiveness against the EMU bloc since 2008 has been 10pc. Yet economists say it is far from clear whether Spain is chasing the right target or even whether it can recover within EMU. Deflation has pushed the numbers out of work to 26.2pc, with 55.9pc youth unemployment. 06.30 This morning's Financial Times reports that enthusiasm for eurozone entry is cooling among the EU's newest members. Latvian prime minister Valdis Dombrovskis has said he is struggling to get public support for the planned 2014 joining date, while Bulgarian president Boyko Borisov said his government would put off entry until the eurozone crisis was over. Czech prime minister Petr Necas ruled out joining any earlier than 2020, and said entry would be subject to a referendum.