George Osborne has said he is "optimistic" that the Spanish banking crisis can be solved.
The Chancellor said that the eurozone was striving to forge a plan that will stabilise Spain's beleaguered banks.
However, he said that resolving the problems in Spain would not see an end to Europe's woes and he called for permanent measures to stabilise the single currency bloc.
"I am optimistic that people are working hard on a solution and a solution, I think, is coming. They have identified the problem. I know they are working very hard on an imminent solution," he said.
"I think one of the mistakes we have made over the last couple of years as a world is to assume that if you just get through the latest eurozone problem, the crisis is solved. It is not.
"Just bringing some stability to the Spanish banking system is not going to end the instability in euro. There need to be more permanent changes to make this currency work."
His comments came as Spain said it would attempt to raise funds on credit markets amid reports it has been seeking a bailout from eurozone funds.