The contagion in the euro zone which began in Greece has now spread to Spain amid fears that it will soon destroy the single currency.
Concern about the financial viability of both countries have dragged stock markets down across Europe once again this morning on the back of heavy selling across Asia overnight.
European bank values were under particular pressure after ratings agency Moody's last night cut the credit ratings of 16 Spanish banks.
Many banks are already fearful of the level of their exposure to Greek debt, especially as the country appears to be heading for the euro zone exit.
Various scenarios regarding Greece's departure – both orderly and disorderly – are now being played out among economic experts as members of the single currency brace themselves for the worst.
Despite the UK not being a member of the euro zone, Prime Minister David Cameron has voiced his concerns about the potential impact of the "truly worrying" crisis.
Britain has "some advantages" over other European countries "because we've got our own currency, our own central bank, because we've got a strong government, a strong deficit reduction plan, our banks are strong".
"We do have those advantages but of course if things do go badly wrong in the euro zone that affects us, that's where 40% of our trade goes," he said.
Cameron vowed to "keep Britain safe" from the the crisis.
"We've got to do more to persuade the euro zone countries to take the really decisive action to deal with the problems that they've got," he said.
Last night, across Asia, stock markets fell sharply. The Nikkei average fell 3%, recording Japan's biggest one-day fall since last August.
Amid the market chaos, demand for bonds is rising as traders seek a safer haven for their money.