Spain and Italy seem to be moving closer to the danger zone where a bailout by the European Union and the International Monetary Fund becomes unavoidable.
The markets' nerves were shredded against a backdrop of increasing discord among European politicians and policymakers over how to handle the single currency's spiralling economic and financial crisis.
Mario Draghi, the President of the European Central Bank (ECB), launched a withering attack on the Spanish Government for consistently failing to get to grips with the problems in its banking sector.
"There is a first assessment, then a second, a third, a fourth," Draghi said in the European Parliament. "This is the worst possible way of doing things. Everyone ends up doing the right thing but at the highest cost."
A raft of poor economic data in the US compounded fears for the eurozone and the global economy. US GDP expanded by just 1.9 per cent in the first quarter, rather than the 2.2 per cent first estimated, while jobless figures climbed.
The crisis raging in the Spanish regions and the country's banks kept the country's borrowing costs in the danger zone. The price of oil fell again, although stock markets were calmer after Thursday's rout.
Draghi said the central bank was powerless to stop the debt tornado.
"It's not our duty, it's not in our mandate" to "fill the vacuum left by the lack of action by national governments on the fiscal front," he said.
Olli Rehn, the EU's top economic official, called for urgent action to "avoid a disintegration of the eurozone". The economic affairs commissioner said politicians had made progress, but it had been "uneven and seemingly inefficient".
The interest rate on 10-year sovereign bonds of both recession-struck nations spiked up in the afternoon.
Yesterday it cost Spain 6.6 per cent to borrow for 10 years. Italy's equivalent costs were 6 per cent. The price of insuring the debt of both nations also rose, in a sign of increasing investor anxiety, with the Credit Default Swap rate on five-year Spanish debt hitting a record high.
Last week the Spanish Government announced plans to inject a further €19 billion ($31 billion) into Bankia, the country's fourth largest lender, which has been crippled by bad loans to the nation's collapsed property sector.
An independent audit of Spain's banks, which are estimated by some analysts to be stuffed with more than €100 billion of bad loans, is under way and will report next month. The audit is widely expected to announce that many of Spain's other lenders need significant capital injections too.
The fear of investors is that the Spanish Government will be unable to afford to rescue its banks, forcing the country to apply for help from the €500 billion European bailout fund and the IMF.
Earlier this week, Spain floated a plan to shore up Bankia by issuing the bank directly with its own sovereign bonds, which would allow the lender to swap these securities for euro loans at the ECB.
But the ECB said it had not been consulted on any such plan. Analysts have also pointed out that this would merely make Spain's banks more vulnerable by tying their fate even more closely with a Spanish Government that is in danger of being frozen out of the capital markets.
The severe austerity measures being pushed through by Spain and Italy, under strong pressure from other European states, seems to be deepening their respective recessions. Spain is forecast by the OECD think tank to contract by 1.6 per cent this year. Italy's economy is seen contracting by 1.7 per cent in 2012.
Unemployment levels in Spain have hit 25 per cent. In Italy the rate is 9.8 per cent.
This prompted the Italian Prime Minister, Mario Monti, to warn of a potential social "backlash" against the cuts being forced through in the teeth of recession.
"We have to be mindful of the sustainability of fiscal discipline and the reform process" he said.
"It is obvious that there is going to be, sooner or later, a backlash against fiscal and structural reform".
The Spanish Government is believed to be keen to avoid a formal national bailout since this would come with strict controls on its taxation and spending policies.
Instead, Madrid is believed to have been pressing for the European bailout fund, the European Stability Mechanism, to commit funds to recapitalise Spain's banks directly.