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UPDATED 11:29 EDT: The G7 did not release a statement after the conference call Tuesday to discuss the eurozone’s financial predicament. Kyodo News Agency reported that Japan’s Finance Minister Jun Azumi told reporters the G7 finance ministers had agreed to cooperate on the situation in Europe. The Treasury Department said in a statement that the officials agreed to monitor the situation, The Associated Press said. The G20 leaders will be meeting in Mexico on June 18–19 and Europe will be high on their agenda.

Spain warned on Tuesday that it could lose access to credit markets, the lifeblood of its economy, as the Group of Seven industrialized countries met to discuss the eurozone fiscal crisis that threatens the global economy.

Spain said its borrowing costs have been driven so high by credit markets that they are effectively closing the door on the struggling nation’s banks. Spain’s Budget Minister Cristobal Montoro urged the country’s eurozone partner to act quickly before its access to credit markets is totally choked off. 

“The risk premium says Spain doesn’t have the market door open,” Montoro said on Onda Cero radio. “The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt.”

Montoro is referring to the spread between Spain’s 10-year bonds, which yield about 6.3 percent, and Germany’s 10-year bonds, which yield 1.2 percent.

Reuters reported that Germany is likely to come under increasing pressure to give more to aid Spain and other struggling eurozone members by stimulating growth. The G7 finance ministers met by conference call and a G7 source told Reuters it was likely the chat would become a “Germany bashing session.” The source requested anonymity because of the confidential nature of the talks.

The source added that ministers would discuss the situation in Spain on the call and confirmed that Germany was pushing Spain to accept an EU rescue to help it recapitalize its stricken banks.

“They don’t want to. They are too proud. It’s fatal hubris,” the source said of the government in Madrid.

Berlin and the European Central Bank have so far resisted pressure from Madrid to ride to its rescue without forcing Spain into the humiliation of an internationally supervised bailout.

French Foreign Minister Laurent Fabius said Europe must find a solution to the Spanish banking crisis that does not add to Madrid’s already heavy budget deficit.

The ECB holds its monthly rate-setting meeting on Wednesday and European Union leaders meet on June 28-29 to discuss a strategy for overcoming the crisis, which began in late 2009 when Greece revealed it had covered up a huge budget deficit.

Investors have fled peripheral euro zone sovereign debt for the relative safe haven of German Bunds and U.S. and British government bonds amid worries about Spain’s banking crisis and fears that a June 17 Greek election could lead to Athens leaving the euro, setting off a wave of contagion around the euro area.

Spain will test the market on Thursday by issuing between 1 billion euros ($1.24 billion) and 2 billion euros in medium- and long-term bonds at auction.

Emilio Botin, chairman of the nation’s biggest bank, Banco Santander told Reuters Spanish banks needed about 40 billion euros in additional capital, adding that “there is no financial crisis in Spain”. Montoro said the figures were “perfectly accessible”.

But his dramatization of the debt situation set a stark backdrop for the conference call of the United States, Canada, Japan, Germany, France, Italy and Britain, plus European Union officials.

“Announcing that Spain no longer has market access 48 hours before a crucial bond auction hardly inspires confidence,” said analyst Nicolas Spiro of Spiro Sovereign Strategy.

Montoro’s comments appeared aimed at pressuring the ECB and EU paymaster Germany to find ways of intervening. But the central bank has so far shunned calls to resume purchases of Spanish government bonds, and Berlin has rejected allowing direct aid from the euro zone’s rescue fund to recapitalise Spanish banks without setting conditions for the government. 

The festering euro zone crisis has sparked mounting concern outside Europe, with the United States fretting that it could further harm its faltering economic recovery, and countries such as Japan and Canada fearing fallout for the global economy.

Ottawa and Washington both called for action after a G7 source said fears that capital flight from Spain could escalate into a full-fledged bank run had triggered the emergency talks.

“Markets remain sceptical that the measures taken thus far are sufficient to secure the recovery in Europe and remove the risk that the crisis will deepen,” White House press secretary Jay Carney told reporters.

In a sign of increasing concern about the euro area’s debt crisis, Australia’s central bank cut interest rates by 25 basis points to 3.50 percent, the lowest level in two years. It cited further weakening in Europe and a deterioration in market sentiment.

Pressure is building in particular on Germany, the biggest contributor to euro zone rescue funds, to back away from its prescription of fiscal austerity for the region’s weaker economies and to work harder on fostering short-term growth.

Berlin argues it is already doing its share by encouraging generous domestic wage settlements, accepting the prospect of higher-than-usual German inflation and most recently agreeing that Spain should have more time to achieve its fiscal targets.

Furthermore, Chancellor Angela Merkel opened the door on Monday to the prospect of a euro zone banking union in the medium term, saying she would discuss with EU authorities the idea of putting systemically important cross-border banks under European supervision.

However, Berlin is resisting the idea of a joint deposit guarantee for euro zone banks and a bank resolution fund, both of which would create extra liabilities for German taxpayers.

A German government strategy paper seen by Reuters sets out a timetable for closer fiscal union in the euro zone, but Berlin does not expect final decisions on strengthening economic policy coordination until March 2013, with only a roadmap being agreed at this month’s summit.

The ECB could contribute by cutting its main interest rate, lowering its deposit rate to try to shake loose some 700 billion euros parked overnight in its vaults by anxious banks, or by providing a third big liquidity injection to banks.

But most analysts believe the bank is more likely to await the outcome of the Greek election and the EU summit before taking decisive action.

A G7 source said there was only a very small chance the G7 would go as far as to pledge coordinated action to curb excessive currency volatility. Japan, for one, fears a strong yen, which has been a safe haven for investors during the euro zone crisis, could help tip its economy into recession.

The G7 could also call for concerted action at the upcoming summit of the wider Group of 20 major economies in Mexico on June 18-19, the source said. The G20, which includes China, played a prominent role during the 2008-2009 financial crisis.

Reuters contributed to this report.

Alec Young, SP Capital IQ and Roger Altman, Evercore Partners chairman, discusses the growing anxiety in Europe, as G7 leaders and central bankers talk about the future of the euro zone.