Debt Crisis: Cyprus rating slashed as EU rules out debt haircut - live

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S&P has downgraded Cyprus' credit rating two notches to CCC+, as Eurogroup leader Jean-Claude Juncker dismissed a Greek-style debt writedown for the stricken island nation.

• Sweden slashes economic forecast • UK economic growth revised down to 0.9pc • Cyprus credit rating slashed as EU warns 'no debt haircut' • Eurozone entry cooling among EU's newest members • Putin offers Depardieu Russian passport • French austerity budget passed

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12.18 Brussels correspondent Bruno Waterfield has reported that leading French tycoon Alain Affelou has announced a move to Britain, following several of his other high-profile countrymen out of the country . However, Mr Affelou has refused to link his departure with the country's stern austerity budget paseed yesterday, which imposes 75pc tax on income over €1m .

Alain Affelou, a French millionaire who runs a chain of opticians

12.00 After Italy's upper house voted through prime minister Mario Monti's 2013 budget yesterday, it is widely expected the bill will be given final approval this evening , paving the way for Mr Monti's resignation and what promises to be a colourful electoral campaign, very likely including the shamed former prime minister Silvio Berlusconi .

In his latest in a string of swipes at the current premier, Mr Berlusconi featured on Italian radio this morning, saying "Italy's technocrats have bowed to the demands of the EU - especially the 'German' and 'Northern' EU - which only lead to recession. It's not only my opinion, but also that of several Nobel Prize winners." (thanks Open Europe for the quote)

It was also reported today Mario Monti is to hold his year-end press conference on December 23 at 11am, when he is hotly anticipated to annouce whether he will launch a leadership bid.

Italian prime minister Mario Monti, who was appointed last December without an election after Silvio Berlusconi was forcibly ejected from office

11.44 Former Irish taoiseach (prime minister) John Bruton has struck out at British euroscepticism in the Irish Times. He said British popular opinion ignores the role in EU decisions of British MEPs, British ministers and a British commissioner, instead seeing Europe as a foreign country. He slated British expectations as "unrealistic", because "it will not be a negotiation with bureaucrats in “Brussels”, but with all 26 other members of a club of which the UK has been a full member over 40 years."

Read his full piece here .

11.11 Bucking the trend for northernly EU members to revise down their GDP growth figures (see 10.09 and 10.37 ), Denmark has revised up its third quarter - albeit slow - growth. Danish GDP grew 0.3pc in quarter three after estimates had pegged it at 0.1pc. But one economist warns watchers not to read too much into this. Steen Bocian, chief economist at Dankse Bank in Copenhagen, said:

The revision stems from upgrades in public spending and inventory investments, which are the two most backward looking components of GDP. It says the least about future growth. The revision gives no indication that things are looking better in anyway.

11.00 UK public finances lurched deeper into deficit in November (Xetra: A0Z24E - news) as spending surged and income tax receipts tumbled 12pc. The shortfall (excluding government support for banks) was £17.5bn , compared with £16.3bn last November. The rise in spending was partly down to a 5pc year-on-year increase in welfare spending, and increased capital investment.

10.46 Commissioner for EU economic and monetary affairs Olli Rehn has said France does not need further budget savings , saying the country already has a credible medium-term budget strategy. His comments, made in an interview with French daily newspaper Le Monde , came as President Francois Hollande's austerity budget was passed in parliament.

Olli Rehn, Commissioner for EU Economic and Monetary Affairs

10.37 Sweden has revisited its GDP figures too, revising this year's economic growth down from 1.6pc to 0.9pc . Finance minister Anders Borg also cut the 2013 growth forecast to 1.1pc, from an earlier forecast of 2.7pc. Yesterday we reported downgraded Finnish GDP forecasts showing the economy shrunk 0.1pc this year, putting the Nordic nation into recession.

10.09 Back home, third quarter GDP growth disappointed as it got revised down to 0.9pc, after earlier estimations had pegged it at 1pc. And although it is still the strongest quarter-on-quarter GDP growth since 2007, this has largely been put down to the one-off Olympic (BSE: OLPCL.BO - news) effect. Read more here .

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." He said:

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 (Xetra: ^GDAXI - news) 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.

Read his whole piece here .

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.

06.00 Good morning and welcome to our live coverage of the eurozone debt crisis.