The fragility of Spain's banking sector and the prospect of Greece being forced to give up the European single currency have pushed the eurozone's debt crisis to new depths.
Herman Van Rompuy, the president of the European Council, was tonight struggling to ensure that the eurozone stays intact until at least the next scheduled formal meeting of EU leaders on 28-29 June.
Such was the turmoil in national treasuries and on the financial markets this week, that that looked doubtful.
Van Rompuy had intended that an informal dinner in Brussels tonight (23 May) of leaders of the EU's member states should concentrate on the preparation of a growth strategy to be endorsed at the end of June.
But the difficulties of Greece and Spain and the divide between Germany and France have upset those plans.
The possibility that Greece could leave the eurozone and the shockwaves that this would send through the European economy is the most troubling for eurozone leaders, but, with no government in Athens, one that they can do little about.
Just ahead of the dinner, Germany's central bank, the Bundesbank, in its monthly report, said that the consequences of Greece's exit from the eurozone would be “considerable but manageable”.
The Greek finance ministry denied that the Euro Working Group, which prepares meetings of eurozone finance ministers, had agreed that each country should prepare contingency plans in case Greece left the eurozone.
World stock markets have fallen sharply amid the uncertainty over Greece and the euro sank to a 21-month low against the dollar.
Eurobonds in dispute
Growth-enhancing measures demanded by François Hollande, the new president of France, such as project bonds, a re-use of structural funds and re-capitalisation of the European Investment Bank, are all being discussed between national capitals, but more radical steps, such as the introduction of Eurobonds or changes to the terms of the eurozone's rescue fund, have run into German opposition.
“We think that Eurobonds are not the right path for many reasons and, in our opinion, they cannot be part of a growth strategy,” a German government official said.
Before setting off for the meeting in Brussels, Hollande said: “I will do everything I can in my position to convince the Greeks to choose to stay in the eurozone and everything to convince Europeans who might doubt it of the necessity of keeping Greece in the eurozone.”
Spain, meanwhile, is under pressure to reveal how it plans to shore up its banking system, which is burdened by bad debts, without imperilling its public finances.
Mariano Rajoy, the prime minister of Spain, said that his government had no intention of asking for international or EU bail-out money.
The gap between the relative performances of eurozone member states was laid bare yesterday when Germany sold €4.56 billion of two-year bonds with an average yield of virtually nothing: 0.07%. By contrast, Spain and Italy's borrowing costs rose, hovering around the 6% mark, a rate considered unsustainable in the long term.
The Organisation for Economic Co-operation and Development (OECD) said on Tuesday (23 May) that it expected eurozone economies to contract by 0.1% this year and to grow 0.9% next year, deepening the gap with other leading economies. Across the world, the forecast is for 1.6% growth in 2012 and 2.2% in 2013.
Eurozone growth is dragged down by Italy (-1.7% this year) Spain (-1.6%), Greece (5.3%) and Portugal (3.2%), but Germany is projected to grow 1.2%.