By Hugo Duncan

PUBLISHED: 12:45 EST, 31 May 2012 | UPDATED: 19:51 EST, 31 May 2012

Senior European officials last night issued a grave warning that the very survival of the euro is at risk as the crisis in Spain threatens to tear the region apart.

Politicians and central bankers said the situation in the eurozone was unsustainable and drastic action was needed to prevent the ‘disintegration’ of the single currency.

They spoke out as European leaders scrambled to stop the financial crisis in Spain spiralling out of control and infecting other countries such as Italy.

Mario Draghi, President of the European Central Bank (ECB), called for Eurozone leaders to come up with a plan for the future to keep the single currency afloat

Mario Draghi, President of the European Central Bank (ECB), called for Eurozone leaders to come up with a plan for the future to keep the single currency afloat

One analyst warned of ‘a perfect storm’ in Spain as the country’s deputy prime minister held crunch talks in Washington with US Treasury Secretary Tim Geithner and the head of the International Monetary Fund, Christine Lagarde.

It is thought the IMF is drawing up contingency plans for Spain to prevent a cataclysmic financial meltdown.

The euro crashed to a 23-month low against the US dollar at $1.2335 but was up slightly against sterling having recovered from its lowest level since late 2008. Last night,  1 was worth 1.2460 euros.

Mario Draghi, president of the European Central Bank, said the eurozone was unsustainable in its current form. In his sharpest criticism yet of eurozone leaders’ handling of the crisis, he said the ECB could not ‘fill the vacuum’ left by governments in terms of economic growth or structural reforms.

The head of the European Central Bank called on EU leaders including David Cameron and German Chancellor Angela Merkel, to come up with a long-term plan for the euro

The head of the European Central Bank called on EU leaders including David Cameron and German Chancellor Angela Merkel, to come up with a long-term plan for the euro

And he called for overwhelming force to be used to shore up Europe’s battered banks to restore confidence in the financial system.

Ignazio Visco, governor of the Bank of Italy and a senior ECB member, said political inertia and bad economic decisions have put ‘the entire European edifice’ at risk. ‘There are growing doubts among international investors about governments’ ability to ensure the survival of the single currency,’ he said.

Olli Rehn, EU economic and monetary affairs commissioner, said bold action was required ‘if we want to avoid a disintegration of the eurozone’.

The apocalyptic tone from usually measured EU officials betrayed the spreading sense of panic.

Irish voters are likely to approve a European treaty on budget discipline in yesterday’s referendum – securing continued aid. The result will be announced later today.

But the outcome of a second Greek election on June 17 – seen as crucial for the country’s future in the eurozone – is too close to call.

And fears are mounting that Spain, the fourth biggest economy in the eurozone, will be the fourth country to need a bailout.

City commentator David Buik, of financial betting firm BGC Partners, said: ‘There is an uncomfortable feeling out there. Whilst EU politicians and bureaucrats continue to waffle and the army of intellectual egg-heads proffer their useless economic advice, sentiment will continue to be negative.’

Investment bank JP Morgan warned that Spain would need 280billion to keep it afloat, with UK taxpayers potentially forced to stump up billions through the IMF.

The Spanish banking system has been crippled by nearly 150billion of toxic loans to homeowners and developers. One in four Spaniards are now out of work.

Bankia, one of the country’s biggest lenders, has asked the government for a 15billion lifeline, triggering concerns about the scale of the losses at other Spanish banks.

With Spain’s regions also in trouble, international investors are betting that the Spanish government will not be able to foot the bill for it all. Edward Thomas of investment firm Quantum Global Wealth Management declared: ‘It’s a perfect storm for Spain.’

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This is beginning to have the inevitability of the Berlin Wall coming down. The creators will be denying it till the end, but historical imperatives mean it will happen and the European experiment go the same way as communism. It's going to be painful and it will cost us as ordinary people, but we'll recover.

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I doubt that there is enough money left in the entire world to save Greece and Spain now, the situation has been allowed to unravel for too long and typifies why the Eurozone can never work, no country is prepared to give up sovereignty, so are unable to align themselves economically, in case it disadvantages them.

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Let it all collaps who gives a damn apart from Cameron, Clegg, & Merkal. The sooner it bites the dust the sooner we can start to rebuild and call Britain GREAT again. Cameron is under no illusion about the way the electrate feels about his precious E.U. He along with Clegg & Milliband are dead men walking and we have to make sure they stay that way at all future elections both local and general. I for one would like to see UKIP given the chance to prove they are made of integrity and honour, honesty and loyalty to the electrate is a very powerful tool. I am an ex Tory voter, i am ashamed that the party ive voted for all my life have let us all down with spin, lies, treachery, and deception. The big 3 deserve to be thrown into chaos at all future elections it will show that the people are angry and do have a voice and will be heard.

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The UK maybe out of the Euro but we are being dragged down by our ridiculous insistence to stay in Europe change we must.

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If the Eurppean Union was a horse, they would have shot it years ago. Why are they keeping this useless monstrosity on life support ? It beggars belief - Ruckus, over here , 01/6/2012 02:02 ERRRRRR , If the European Union was a horse they would have eaten it ! This is why British horses HAVE to have a vetinary passport in the same way as a Beef does...its european law !!!

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The European Union --Dead Man Walking !

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If the Eurppean Union was a horse, they would have shot it years ago. Why are they keeping this useless monstrosity on life support ? It beggars belief

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Germany's third attempt to conquer Europe is failing. Big surprise. - Bob Steele, Clearwater, FL, USA, 1/6/2012 1:27------------ If it does, the fourth is much more likely to succeed - unless Russia gets there first.

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If the Europhobes wishes come true, I hope that not too much of this money flowing out of Spain is heading to the UK. The Bank of England is going to end up with a very large IOU from Banco de Espana. - John S, Bromley, 1/6/2012 0:00-------------- Red arrows galore! The ignorant masses willing on the collapse of Spain (and Greece) obviously completely underestimate the consequences to the British banking sytem and to the UK itself. The money flowing out of Spain is electronic money, effectively IOUs. The national bank of Spain acts as guarantor for those IOUs. Once the payments reach the UK, the Bank of England becomes the guarantor and the IOUs are passed on to the recipient bank and subsequently to the customers account, where they can be exchanged for real money. If Spain goes under, the Bank of England is left holding worthless IOUs. Try Googling "RTGS" and "TARGET2".

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Before we cheer too loudly remember the people of Greece- they are doing the suffering, they NEVER VOTED to be in Europe or in the Euro, They never invented a UKIP or Referendum Party, Thier MPs got nice salaries to dump them in the eurosoup. Even the Prime Minister Pappandreou only lasted 20 hours after suggesting a Referendum. Now The Greek people feed themselves out of dustbins and hand over their children to ophanages so that they may be fed...life was never so hard before they were thrown into the European project with false promises of riches and growth- just the same thing happened in Ireland. Europe will use this crisis as a way of imposing a SINGLE EUROPEAN GOVERNMENT-agree or you won't eat.To the European Commissioners this crisis is an "opportunity". Britain must leave the European Union rapidly so that we may become capable of providing relief to the starving europeans.The only route out for Britain is via UKIP currently, I can't see any other way.and stuff the IMF

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