By Simon Miller

Europe is on the threshold of catastrophe according to a global group of economists as Spain’s debt nears 8%.

In a report from the Institute for New Economic Thinking, the eurozone’s fault lines were readily apparent and the interaction between markets, inadequate institutions and the unsustainable political conditions in many countries was “driving the European economy toward depression and the eurozone towards disintegration”.

The report said there had been little overlap between what is economically and financially necessary to repair the flaws in the euro zone system and what is politically feasible in an environment that has degenerated into distrust among nations within the system.

As a result the eurozone system was “thoroughly broken” and this systemic failure had “exacerbated a boom in capital flows and credit, and complicated its aftermath after the boom turned to bust”.

The report said it was the responsibility of all European nations that were parties to the euro’s flawed design, construction, and implementation to contribute to a solution otherwise the absence of a collective effort would see the euro zone disintegrate quickly.

“The stresses have been building for a long time and conditions in several countries are not socially or politically sustainable much longer,” the report said.

The warnings come as Spain’s debt problems grow larger as its ten-year yield edges further up hitting 7.751 this morning before sliding back to 7.5% as of 10.46BST.

The increasing pressure on Spain’s costs led to reports yesterday that during a meeting with German finance minister Wolfgang Schaueble, Spain’s economy minister Luis de Guindos was told that Spain should request a €300bn bailout from Brussels.

The funds would initially come from a €100bn loan from the European Financial Stability Facility with the rest coming from the European Stability Mechanism when in came online according to Spanish paper El Economista.

Despite an official denial from the government, sentiment over Spain’s rising funding costs spilling over to Italy. Italian ten-year bonds are also rising hitting a high of 6.706% this morning.

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