UPDATE 1-Italy sees EU single market at risk if COVID-19 response not coordinated

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MADRID, July 8 (Reuters) - Italian Prime Minister Giuseppe Conte on Wednesday warned that the single European market could be at risk if the area's response to the economic fallouts of the COVID-19 epidemic was not "strong and coordinated".

"We would destroy the single market," Conte told reporters in Madrid at a press conference with Spanish premier Pedro Sanchez.

Conte's visit to Madrid followed one to his Portuguese counterpart Antonio Costa in Lisbon, as southern European countries continue to seek a common position on the negotiation over a recovery fund to relaunch the bloc's economy.

European leaders will meet in Brussels on July 17 and 18 to try to reach a deal on the fund's structure, although differences remain, also on whether it will be based on loans or outright grants to those in need.

"If we do not meet the challenge, we'll be judged negatively by history," Conte added.

Along with the recovery fund and financing from the European Investment Bank, the European Union has offered its member states the financing line of the European Stability Mechanism (ESM).

In both Spain and Italy governments are assessing whether to access the loans.

"There is no point in creating instruments and then being ashamed to use them," Spanish PM Sanchez said.

Conte has repeatedly said Italy will decide on the ESM once the Union has agreed on the entire support package, as its ruling majority remains deeply divided on the issue.

The 5-Star Movement party believes the ESM loans will impose heavy constraints on national sovereignty in the future, despite Brussels' assurance that the only condition would be to use that money for the health system. (Reporting by Angelo Amante in Rome and Belen Carreno and Nathan Allen in Madrid, editing by Giulia Segreti, William Maclean)