Ratings agency Fitch has downgraded Spain's sovereign credit rating to BBB as leaders renewed their calls for "urgent action" to deal with the crisis in the eurozone.
The decision to downgrade the country's long-term foreign and local currency Issuer Default Ratings from A relates to the cost of restructuring the Spanish banking sector, and higher projections for Government debt.
David Cameron said this afternoon that greater integration across the euro area was "necessary". In a joint press conference with German Chancellor Angela Merkel
after a meeting in Berlin, the Prime Minister said Britain and Germany were "as one" on the agenda of encouraging growth in Europe.
"When it comes to the eurozone crisis, I’m very clear that urgent action is needed to deal with market uncertainty,” he said.
“That is about building firewalls and recapitalising banks, but it’s also essential that we need credible plans for getting on top of deficits and debt, and we also need those structural reform plans, completing the single market, to make sure we can get good growth throughout the European Union, including in the single currency area.
“No doubt that the single currency countries will want to seek greater integration, that is clearly going to happen over the coming months and years.
“We won't be joining the single currency, so we won't take part in that integration, but we know that it's necessary for the single currency to deal with these issues so that it can work properly in the future.”
Mr Cameron said earlier that Germany cannot solve the eurozone crisis single-handedly and called for a "whole series" of measures to stabilise the single currency area.
Also this morning George Osborne said he was "optimistic" over plans to resolve the Spanish banking crisis, but warned that further action, including greater banking and fiscal harmonisation, was necessary "in pretty short order".
Speaking to the Today programme, the Chancellor said: "I think you need to put in place, in pretty short order, the things that are going to make the single currency work on a medium to long-term basis, and that includes a greater harmonisation or a greater integration of fiscal polices, of banking policies."
On the Spanish banking crisis, Mr Osborne said: "I am optimistic that people are working hard on a solution..[but] just bringing stability to the Spanish banking system is not going to end the instability in the eurozone."