The Prince, who is on an official visit of reconciliation to Argentina and will visit the Falklands at the weekend, was speaking at the Alvear Palace Hotel in Buenos Aires to a VIP audience, including the Argentine leader, President Carlos Menem. His comments were immediately seized upon by Argentine politicians and prompted furious scenes from hundreds of demonstrators who gathered outside the hotel.
Riot police used tear gas and water cannon on the crowd, which burnt Union flags and threw at least one petrol bomb. Two police officers were injured and 27 people arrested.
Last night Foreign Office officials were trying to salvage the visit, seemingly undone by what was thought to be a downbeat reference to the thorny issue of the Falklands. According to a well-placed Foreign Office source, the Prince had spoken in humanitarian terms.
The speech, which was almost certainly jointly written with the Foreign Office and officially approved, was as close as the Prince could go without being overtly political.
"He spoke in humanitarian terms and it would have been strange to totally ignore the subject," said the source. In his speech, the Prince said: "Mr President, you know that it is not for members of my family to become involved in the business of governments.
"My hope is that the people of modern, democratic Argentina ... will be able to live amicably alongside another modern, if rather smaller, democracy lying a few hundred miles off your coast ... and be able to do so in a spirit of mutual understanding and respect, so neither will again need to feel any fear from, or hostility towards, the other."
But the speech was roundly condemned by senior Argentine political figures. Carlos Ruckauf, the Vice-President, said the visiting Prince's address was "intolerable" and that Britain had "stolen" the Falkland Islands from Argentina.
Mr Ruckauf said the Prince had taken an "intolerable attitude". The Falkland Islanders had no right to self-determination. The Prince's speech, was a "typically British trap", he said.
"The Prince's kingdom is a powerful country which has stolen the islands. His words show his policy of domination."
President Menem has kept a diplomatic distance from the row but Argentina's Foreign Minister, Guido di Tella, attempted to defuse the dispute.
The Prince's words were a "message to calm the islanders", he said.Reuse content