THE euro fell and German bond prices gained yesterday as the Eurozone debt crisis showed signs of escalating after Spain said it was being shut out of credit markets.

The treasury minister of Spain, the Eurozone’s fourth biggest economy, said high borrowing costs meant credit markets were closing to his country, and he made an appeal to the European Union to help Madrid recapitalise its debt-laden banks.

Finance ministers from the Group of Seven major economies discussed progress toward financial and fiscal union in Europe after an emergency call but made no joint statement.

The Eurozone’s blue-chip Euro STOXX 50 index closed up 0.4 per cent, with volumes thinned by a second day of UK public holidays.

The euro, which early yesterday hit a one-week high of $1.2542, fell 0.5 per cent to $1.2436, hit by disappointment that the G7 released no statement following the meeting.

After yesterday’s G7 finance ministers conference call, investors are waiting for a European Central Bank policy meeting today, Federal Reserve Chairman Ben Bernanke’s testimony to the US Congress tomorrow.

Spain is set to test the market tomorrow by issuing between €1bn and €2bn in medium- and long-term bonds at auction.

Business surveys added to the bearish sentiment, saying all of the Eurozone’s major economies are now in various states of decline.