European countries, including the UK, have "failed" in the face of the escalating eurozone crisis, Nick Clegg will declare today.

In a marked change of tone for a Coalition minister, the Deputy Prime Minister will also condemn the distinction drawn between countries outside and inside the eurozone. Both have a responsibility in securing Europe's economic future, he will warn.

The LibDem leader will also rail against the "fashionable" idea that Greece crashing out of the euro would be better for other nations.

A Greek exit appeared a step closer last night after the German Bundesbank backed a squeeze on the country's already precarious finances.

Greek aid should be withheld if its leaders reject agreed spending cuts, the influential institution recommended, as it declared a Greek departure "manageable".

There were also reports that officials in eurozone nations have been ordered to draw up contingency plans for the first ever exit from the currency.

It came as markets fell amid the growing fears, with London's FTSE- 100 index 2.5% lower.

Arriving in Brussels for talks, David Cameron urged fellow EU leaders to take "decisive" action. The Prime Minister called on them to tackle longer-term issues, including how to bail out struggling nations, "or these crises will keep re-occurring".

Earlier, he appeared to give tentative backing to eurobonds, a policy being pushed by new French President Francois Hollande. The move would see wealthier nations assume responsibility for the debt of struggling countries.

The idea is particularly unpopular in Germany, where it would push up the cost of Government borrowing significantly. Speaking on a visit to Berlin, Mr Clegg will today warn of "lasting damage" if Greece plunges out of the eurozone.

As Europeans "we have failed on a number of fronts" to deal with the growing crisis, he is expected to say.

He will add: "We have created different classes of country: strong and weak, spenders and savers, eurozone and non-eurozone. But these divisions are false."

Mr Clegg will also attack what he said was now a "fashionable" assumption, though one "being whispered behind cupped hands", that a Greek exit would be better for Europe.

"No rational person interested in the wealth and wellbeing of Europe's citizens could advocate taking such a risk: not with Greece's future, or our own," he will say.

He will back eurobonds or similar measures, call for the European Central Bank to act as a "real" lender of last resort, create a strong firewall within banks so they can withstand shocks, and maintain a "relentless focus" on creating conditions for growth.

He will also warn that the crisis was the "perfect recipe" for a rise in extremism and xenophobia.

European leaders are struggling to stem the crisis following indecisive elections in Greece, and a rerun of the vote is not due to be held for another month.