Spain is warning that Europe's single currency will unravel unless its leaders decide within weeks to centralise budget and tax policies in the eurozone and agree on a strategy to pool responsibility for failing banks.
As Spain's prime minister, Mariano Rajoy, came under mounting international pressure to accept the eurozone's fourth national bailout in two years, the government in Madrid angrily rejected the demands, insisting that it did not need rescuing. With fears of a euro meltdown having rapidly shifted from Greece to Spain, Rajoy is pleading for a direct eurozone rescue of his country's banks, to avoid the humiliation attached to requesting a national bailout.
Sources familiar with the Spanish government's thinking said its negotiating position was that the fundamental quandary facing the eurozone was not Spain, but a European failure of leadership in persuading the financial markets that the euro would be defended at all costs.
A Brussels summit at the end of the month would have to remedy that by agreeing to establish a eurozone banking and fiscal union – major federalising steps certain to be fought over. Without that commitment, Spain fears the single currency would be finished in months.