Germany has warned it cannot save the eurozone alone, as borrowing costs leave Spain on the ropes and Italy and France hold crisis talks to tackle the debt crisis.
Meeting in Rome overnight, Italian Prime Minister Mario Monti and French President Francois Hollande stressed more needed to be done to ease market pressures amid black news for Spain, worrying signs in Italy and concern over the upcoming Greek election.
"The progress made, including in the governance of the eurozone, is not sufficient and we need to strengthen the weak parts of the system," Monti said, adding that the views of Italy and France on the crisis were closely linked.
International financial watchers are waiting with bated breath for a crucial Greek election which may see Athens exit the eurozone and could have a knock-on effect on struggling Spain and Italy.
With just three days to go before Greeks vote to continue with austerity or bring in a party which has promised to tear up the bailout conditions, Monti and Hollande said they hope Greece will stay in the eurozone.
"I want to reaffirm the hope, shared with President Hollande, that Athens will remain in the eurozone and respect its engagements," Monti said.
The reference to the need to tackle governance in the eurozone came after Germany-fuelled calls for a big leap towards further EU integration.
Chancellor Angela Merkel issued a harsh warning earlier in the day on the impossibility of Berlin saving the eurozone on its own.
"Germany is strong, Germany is an engine of economic growth and a stability anchor in Europe. But Germany's powers are not unlimited," she said in a speech outlining Berlin's position ahead of the June 18-19 G20 meeting in Mexico.
Monti said the leaders had "exchanged opinions on the hypothesis" of "shared bonds" and discussed "sovereign debt and instruments to re-establish confidence in the most-exposed countries."
Presidential sources in Paris said Hollande has prepared a "road map" which probes the benefits of pooling debt.
But Merkel earlier said that those clamouring for Germany to "pour billions into eurobonds, stability funds, European bank deposit guarantee funds" wanted a quick crisis fix that was unsustainable.
She stressed Europe would only find a way out of the crisis with a strong "political union" with greater fiscal co-ordination and oversight and insisted "financing growth with new borrowing must stop."
While Italy reeled from a painful bond session on Thursday, Spain's borrowing costs shattered euro-era records after Moody's downgraded its debt close to junk-bond status and warned of a growing risk of a full-blown bailout.