The prospect of Greece crashing out of the euro is damaging economies across Europe, including Britain's, chancellor George Osborne has warned.

Uncertainty over the future of struggling eurozone nations was having a "real impact" on growth, he said.

Speaking in Brussels, where he is attending talks between European Union finance ministers over the continuing crisis, Mr Osborne criticised the "open speculation" by some eurozone members, the Press Association reported.

"The eurozone crisis is very serious and it's having a real impact on economic growth across the European continent, including in Britain, and it's the uncertainty that's causing the damage," he said.

"Of course countries have got to make difficult decisions about their public finances. We know that in Britain.

"But it's the open speculation from some members of the eurozone about the future of some countries in the eurozone which I think is doing real damage across the whole European economy."

Wrangling between the political parties in Athens has raised the real prospect of Greece leaving the eurozone - possibly with further bailouts for Athens involving all 27 member states.

The parties are trying to stitch together an emergency administration to run the country after an election delivered no overall majority.

There will be a final push for a deal on Tuesday but, if no deal can be reached, elections must be called for next month.

The prospect of another election increases the likelihood of the Greek public rejecting the austerity package which has severely hit jobs and incomes.

But the European Commission has warned that any Greek administration would have to honour the austerity policy agreed as part of multibillion-pound EU-IMF bailout packages to keep Greece afloat.

The growing uncertainty hit markets, with nervous traders wiping £28.5 billion from the value of London's leading shares index.

But the European Commission insisted the austerity plan remained the best option.

A spokesman said: "This is the best thing for Greece, for the Greek people and for Europe as a whole. Nothing has changed in our position - we want Greece to stay in the euro, we think the Greek (austerity) programme is the best course for Greece and, while we respect the on-going efforts in Greece (to form a government), we say that Greece must honour its (austerity) commitments."

The Spanish government, struggling with its own economic crisis and likely to need a massive EU bailout, urged Greek politicians to resolve their differences and stick to the austerity path to avoid further economic "contagion".

Downing Street insisted any funding to stabilise Greece during the process of leaving the eurozone should be for the eurozone countries alone - just like bailouts for those inside the single currency bloc.

Deputy prime minister Nick Clegg warned eurosceptics against gloating over the plight of the euro.

He said: "We as a country depend massively on the prosperity of the eurozone for our own prosperity, which is why I can never understand people who engage in schadenfreude - handwringing satisfaction that things are going wrong in the euro."

Answering questions during a visit to a school in Islington, he added: "We have an overwhelming interest - whatever your views are on Brussels and the EU - in seeing a healthy eurozone.

"That's why I very much hope, buffeted by these latest scares and crises in Greece and elsewhere, that the eurozone moves as fast as possible to a sustainable solution, because if the eurozone is not growing and the eurozone is not prosperous it will be much more difficult for the United Kingdom economy to gather momentum."

Despite pressure from new French president Francois Hollande to ease austerity and back growth, there remains no sign that Greece's partners are prepared to relax the terms of the bailout deals.

Measures to boost growth are certain to be discussed at the G8 summit at Camp David in the US on Friday, where Mr Cameron will meet Mr Hollande for the first time.