Just a quick re-cap for DFC et al:
1.2.1 The states of emergency are classified as follows:
a) Distress A condition of being threatened by serious and/or imminent danger and of requiring immediate assistance.
b) Urgency A condition concerning the safety of an aircraft or other vehicle, or of some person on board or within sight, but does not require immediate assistance.
So my money's with Chilli, rustle et al. If anything, declare a PAN (to warn ATC that things aren't quite hunky dory). If the second engine should go, then declare MAYDAY.