Obama: "The challenges they face [Europe] are solvable. Right now the focus has to be on strengthening the banking system... They [Europe] will have to look at how to achieve growth while trying to carry out structural reforms - that may take years to accomplish...
If they are just cutting and cutting and cutting and unemployment goes up and up and up and people stop spending money - ironically that can make it harder for them to carry out reforms over the long term.
If Europe goes into recession that means we're selling fewer goods and fewer services and that slows our recovery."
It is understood finance ministers from across the Eurozone will hold a telephone conference to discuss a bailout for Spanish banks.
Angela Merkel said Europe was ready to act to ensure stability in the euro zone as Spain's credit rating was cut by three notches.
"We are ready to back the use of euro-area instruments" - Did Merkel just hint at a breakthrough for the banks?