Prime Minister David Cameron has held a meeting with German Chancellor Angela Merkel and said urgent action is needed to end market uncertainty over the euro crisis.
At a news conference after their meeting in Berlin, the Prime Minister said he could understand a closer banking union between the eurozone countries might help ease the region's financial woes.
Mrs Merkel added that her country, the powerhouse of Europe, would be prepared to use available eurozone financial instrument to help avert disaster.
She said: "It is important to stress again that we have created the instruments for support in the eurozone and that Germany is ready to use these instruments whenever it may prove necessary.
Meanwhile, the ratings agency Fitch has downgraded Spanish government debt from A to BBB and warned there may be more to come.
Fitch said Spain's banks may need 100 billion euros (£80bn) of extra capital to withstand future losses.
The agency's director, Douglas Renwick, told Jeff Randall Live that Spain "needs support to re-capitalise its banks, but there are many kinds that can be offered."
Renwick added: "We see a fundamental difference between Spain and Greece. We think Spain has a stronger economy."
Earlier on Thursday, US Federal Reserve chairman Ben Bernanke told Congress that the European crisis and possible Congress-imposed drastic cuts in spending pose important risks for the US economy.
"European policymakers have taken a number of actions to address the crisis, but more will likely be needed to stabilize euro-area banks, calm market fears about sovereign finances, achieve a workable fiscal framework for the euro area, and lay the foundations for long-term economic growth," Mr Bernanke said.
"US banks have greatly improved their financial strength in recent years... Nevertheless, the situation in Europe poses significant risks to the US financial system and economy and must be monitored closely.
"As always, the Federal Reserve remains prepared to take action as needed to protect the US financial system and economy in the event that financial stresses escalate."
Mr Cameron last visited the German capital seven months ago , in November 2011.
At the time relations between the two countries were frosty as the two leaders differed on the best way forward for the single currency.
On that occasion they agreed amicably to disagree but insisted they would continue close co-operation to achieve the best outcome for the Eurozone.
Since then the two leaders have met at EU Summits in Brussels and recently at Camp David, the Presidential retreat in America that hosted last month's meeting of the G8 group of countries , as well as having regular talks on the phone.
The UK has pushed for a banking union to run alongside monetary union in the single currency area.
The Chancellor, George Osborne, told BBC Radio: ""The banks have been one of the weak links in all of this. The eurozone have tolerated weak, under-capitalised banks for too long," he said.
"Part of running a single currency - following what I have called the remorseless logic of having a single currency - is that you have something more akin to a banking union or a financial union.
He stressed that the UK would not be involved and would require safeguards to protect its financial sector.
On Wednesday, Spain insisted there were no immediate plans to request European bailout funds to recapitalise its banking sector.
It is estimated the country's banks might need 40bn euros to cope with a property crash.
Recent suggestions that Spain wanted Europe to provide bailout funds direct to its banks were met with firm opposition by Germany which insists any bailout must come with strict and formal austerity conditions.
While Madrid held a successful bond auction today, concerns remain about the interest rate the country must pay to borrow money - given the shaky market confidence.
And to add to the uncertainty, Greece holds a re-run election on June 17 which many are billing as an effective referendum on the country's future in the euro.