The Moody's Investors Service credit-ratings firm said Germany would incur enormous liabilities in a bailout of Spain -- and its banks have "sizable exposures" in that country, as well as Italy, which is also teetering.
Moody's also cited the huge potential costs to Germany if the eurozone broke up, amid report it was increasingly likely Greece would leave the single currency -- after the German news weekly Der Spiegel said Athens' failure to stick to its austerity program would lead to the International Monetary Fund cutting off support.
The report said Greece could default as early as September.
"The material risk of a Greek exit from the euro area exposes core countries such as Germany to a risk of shock that is not commensurate with a stable outlook," Moody's said in lowering its outlook.
The Spanish newspaper El Confidencial said the administration of Spanish Prime Minister Mariano Rajoy was considering "putting on the table" Spain's possible withdrawal from the euro and its return to the peseta currency.
"We would have our own currency again and restore competitiveness," a government source told the newspaper. "It would have some disastrous consequences at first, but we would regain control over our own policies and we would escape from the crisis sooner."
Spain is the 17-nation eurozone's fourth-largest economy, after Germany, France and Italy.
Moody's also shifted to negative its outlooks on triple-A Netherlands and Luxembourg for the same reasons it dimmed its German outlook.
Only Finland -- with a "unique credit profile" and more economic isolation than the other triple-A countries -- maintained a stable Moody's rating.
The two other principal ratings firms, Fitch Ratings and Standard & Poor's, both rate Germany triple-A with a stable outlook.
Germany's finance ministry said the eurozone risks Moody's mentioned were "not new" and said, "The very sound state of Germany's own economy and public finances remains unchanged."
German Finance Minister Wolfgang Schaeuble said his country would continue to play the role of the "eurozone's anchor of stability."
Schaeuble was to meet with Spanish Minister of Economy and Competitiveness Luis de Guindos in Berlin Tuesday.
De Guindos was adamant Monday his country would not need a bailout beyond a recent $120 billion bank rescue.
But Jonathan Loynes, chief European economist of the Capital Economics research firm, told the British newspaper The Guardian, "It looks almost certain that Spain will need a sovereign bailout as well as a banking package."
Cantor Index market strategist David Buik wrote: "There is momentum behind the thinking that Spain will require an official sovereign bailout, which may turn out to be hundreds of billions of euros. Greece's financial problems look like a vicarage tea party in comparison to Spain's fiscal black hole."
Analysts estimate a sovereign bailout could reach or exceed $485 billion. Greece's was about $158 billion.
The existing European Union bailout fund, the European Financial Stability Facility, is down to about $194 billion after bailing out Greece, Ireland, Portugal, Cyprus and Spain's banks.
The new permanent European Stability Mechanism will have more than $606 billion, but faces a challenge in Germany's Federal Constitutional Court that could scuttle the fund in September.
Andrew Roberts, Royal Bank of Scotland PLC's head of European rates strategy, told the British newspaper The Daily Telegraph, "We are fast approaching the endgame."
Spanish borrowing costs rose to modern-era highs Monday, with the two-year bond yield jumping almost a percentage point to 6.74 percent before closing at 6.53 percent.
Yields, which move inversely to prices and reflect the cost of borrowing, also set a fresh euro-era high on Spanish 10-year bonds, which reached 7.56 percent.
Spain's regional governments lined up for internal rescues Tuesday, with Catalonia, which has an economy the size of Portugal, preparing a $4.3 billion bailout request following moves by Valencia and Murcia, the Telegraph reported.
Spain's 17 autonomous regions have an estimated $19.2 billion in debts to refinance by the end of the year, with $7.25 billion in Catalonia.
The Bank of Spain, meanwhile, confirmed Monday Spain's double-dip recession was getting worse.
The country's economy shrank 0.4 percent in the second quarter after shrinking 0.3 percent in the first three months of the year, the central bank said in its monthly report.