Spanish Prime Minister Jose Luis Rodriguez Zapatero suspended moves on Saturday towards a dialogue with Basque separatist organization ETA after the group said it carried out a car bomb blast at Madrid's Barajas airport.
The explosion injured 26 people and brought a nine-month long ceasefire to an abrupt end. Two people were still missing hours after the explosion.
"As the conditions that we laid down have not come about, I have ordered the suspension of all initiatives to develop a dialogue," Zapatero said. "The government considers that today's attack is incompatible with a permanent ceasefire. Today's action is the most mistaken and useless step the terrorists could have taken."
Police estimated the bombers used some 500kg of explosives, Spanish media reported.
"The condition for dialogue was and is the unequivocal desire to abandon violence," Zapatero said.
"The very grave attack today by the terrorist band ETA is radically contrary to that desire," Zapatero said.
"ETA has taken a road that leads nowhere, that only provokes pain," said Zapatero, who cut short a family holiday to take charge of events.
ETA and its political supporters have been warning for months that the peace process was in a state of crisis. They have complained the government has made no gesture to reciprocate for the ceasefire, such as meeting a long-standing ETA demand for its prisoners to be moved to the Basque region itself rather than scattered around Spain.
After a warning call from the armed group, a van exploded around 0800 GMT inside the garage adjoining the airport's new Terminal 4, sending a massive column of smoke into the air and collapsing part of the building, sending rubble crashing onto parked cars.
Two Ecuadorean men believed to have been sleeping inside a parked car were missing in the rubble and 26 were slightly injured, mostly with damage to their ears from the blast's shockwave.
Air traffic at Terminal 4, which is connected to the garage, was halted for several hours but returned to normal by early afternoon, Interior Minister Alfredo Perez Rubalcaba said. Flights were not affected at the airport's other three terminals.
ETA says continued arrests of suspected ETA members and court rulings against the movement break what ETA calls a government promise to let up on the pro-independence movement, and is also angry that the government has refused to allow talks among all Basque political parties -- both pro-independence and mainstream -- on the region's future until ETA's outlawed political wing Batasuna renounces violence.
One witness, Renzo Zarzal, 28, a worker at a nearby highway toll booth, said the blast was strong enough to shake some surrounding buildings.
"I was outside my booth talking to a colleague when there was a massive blast that really shook us and rattled the roof of the toll complex," Zarzal said.
Rubalcaba said the damage to the car park was "extensive" and television images showed a number of floors had collapsed on top of each other.
Rubble had crashed onto numerous cars parked outside the terminal and smoke and dust hung in the air throughout the building, which only opened in February.
Firefighters had to tackle several fires following the initial explosion. Many parts of the building looked unsafe and about to collapse.
As recently as Friday Zapatero had insisted he was optimistic that ETA's ceasefire would lead to a definite peace process.