José Manuel Barroso issued his chilling warning as France began diplomatic overtures to create a eurozone vanguard, potentially with fewer than the 17 existing members of the single currency.

Mr Barroso said that if the euro area of the 17 member states or the wider

27-country EU broke apart the estimated initial cost would be up to 50 per cent of European gross domestic product. “It would jeopardise the future prosperity of the next generation. That is the threat that hangs over us,” he said.

In a speech in Berlin aimed at tackling any support for a smaller elite eurozone comprised of the EU’s strongest economies, Mr Barroso warned that the consequence of a split would be a million lost jobs in Germany.

The result of such an economic shock would be emergence of extremism and divisions within Europe, the former Portuguese prime minister told his German audience.

“Populism and sometimes even nationalism raises its head across our continent,” he said. “This is ignoring the global realities as well as our common history that teaches us that this continent is simply too small and too inter-dependent for us to stand apart, to turn our backs to each other.”

Financial markets tumbled yesterday as news broke that MPs in Germany’s ruling Christian Democratic Union party plan to debate a motion next week allowing countries to leave the euro area.

Angela Merkel, the German chancellor, and Nicolas Sarkozy, the French president, first raised the prospect of a country exiting the euro last week when they said that a proposed Greek bailout referendum would be an in-or-out vote on euro membership.

Leaving the currency area is not envisaged under current euro rules.

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Source: London Telegraph