* Euro falls, erasing earlier gains as Spain worries grow * Spain's Montoro says financial markets closing to Spain * Options market shows rise in demand for euro puts By Julie Haviv NEW YORK, June 5 (Reuters) - The euro fell on Tuesday as Spain's treasury minister said high borrowing costs were closing the country off to credit markets and investors received scant comfort from an emergency conference call of Group of Seven finance chiefs. The euro, which rallied the previous day on euro zone optimism, fell broadly after the G7 ministers did not unveil concrete actions to address problems in Spain and Greece. That disappointed investors hoping for measures. "None of these meetings have produced anything meaningful, and with debt burdens piling up across the globe, I remain highly doubtful that anything substantive will be implemented, and anything that falls short of fiscal union in Europe will allow the crisis to proliferate," said Christopher Vecchio, currency analyst at DailyFX in New York. In a later statement, the U.S. Treasury Department said G7 finance ministers discussed progress towards a financial and fiscal union in Europe. [ID:nW1E8EM02J}. The single currency was last down 0.4 percent at $1.2442 after falling to a session low of $1.2409, more than a cent below an earlier one-week high. On Friday, it had hit a two-year low of $1.2286, using Reuters data. "People will be happy to sell into moves above $1.25," said Anders Soderberg, currency strategist at SEB in Stockholm. The euro has recovered somewhat since weak U.S. jobs data on Friday weighed on the dollar, feeding speculation about the prospect of another bout of monetary easing in the United States. But Soderberg said this was merely "a short-term break in what now seems to be a well-established downtrend". After the G7 call, investors are now waiting for an ECB policy meeting on Wednesday, Federal Reserve chairman Ben Bernanke's testimony to the U.S. Congress on Thursday, as well as Greek elections and a G20 meeting in Mexico both on the weekend of June 17. The G7 talks boosted the euro earlier but it fell after Spain's Treasury Minister Cristobal Montoro highlighted the funding problems facing the euro zone's fourth largest economy. The euro was further pressured when German regulator Bafin on Tuesday said moves to create a banking union in Europe were premature.The euro was last down 0.1 percent at 97.83 yen. This still left it comfortably above Friday's low of 95.57 yen, using Reuters data, the lowest since December 2000. Uncertainty about the euro was evident in the options market, with risk reversals, a key measure of sentiment, on one-month puts, or bets it will depreciate, trading as high as 2.325 percent versus 2.2 percent the previous day. The euro's weakness also pushed implied volatility, a gauge of expected price action, to 12.88 percent on Tuesday, up from 12.65 percent the previous session. The G7 talks prompted some market players to speculate that the European Central Bank could opt for some form of further monetary stimulus when it meets on Wednesday. There has been some talk of a cut, although a recent Reuters poll showed only 11 out of 73 analysts polled expected a move this month. Traders will be looking to testimony by U.S. Federal Reserve Chairman Ben Bernanke on Thursday for any hints on the possibility of more quantitative easing, a negative for the dollar. The dollar got a boost after Japan's Finance Minister Jun Azumi said a strong yen is damaging Japan's economy. The dollar was up 0.5 percent at 78.72 yen, above Friday's 3-1/2-month low of 77.65 yen, using Reuters data. Investors were still wary, however, about the possibility of Japanese authorities stepping in to stem the yen's rise.