The eurozone must decide soon whether it wants to stay together or break-up, David Cameron has told MPs.
The comment comes amid frustration within government that Eurozone leaders have failed to tackle the crisis.
Bank of England governor Sir Mervyn King has warned the euro area poses the greatest threat to the UK recovery.
And on Monday Chancellor George Osborne said uncertainty over Greece’s membership of the euro was damaging the whole European economy.
At Prime Minister’s Questions in the Commons, the prime minister advised the eurozone to “make-up or it is looking at a potential break-up.
“That is the choice they have to make and it is a choice they can not long put off”.
But a well-placed Treasury source has warned it would be “a dangerous delusion” for Eurozone countries to backtrack on deficit cuts.
The Bank of England has cut the UK’s growth forecast for this year to 0.8% from 1.2%, saying the eurozone crisis is still the main threat to UK recovery.
Governor Sir Mervyn King said there was a “risk of a storm heading our way from the continent”.
“Our biggest trading partner is tearing itself apart without any obvious sign of solution,” he said. It would be foolish to think that the UK could navigate these problems “unscathed”.
This echoes comments by Chancellor George Osborne on Monday, who said: “The British recovery has been damaged over the last two years by uncertainty in the euro and that uncertainty would be magnified were a country to leave.
“It is that uncertainty and not austerity that is doing real damage to the European recovery and indeed the British recovery.”
But Labour said EU growth figures for the first quarter of 2010 showed the UK’s recession was “made in Downing Street”.
Shadow Chancellor Ed Balls said: “With Germany, France and the eurozone as a whole avoiding recession, it’s now clear that Britain’s double-dip recession was made in Downing Street by David Cameron and George Osborne’s failed economic policies.
“In the 18 months since George Osborne’s spending review, Britain has been out-performed by most European countries.”
The BBC’s chief political correspondent Norman Smith says the Treasury wants Eurozone countries to agree to a package of measures including so called Euro bonds, re-capitalising struggling banks, a bigger bail out fund and structural reforms to improve productivity