After the G20 leaders` pledge to coordinate the efforts to combat the European debt crisis, eyes will turn to European leaders when they gather in the June 28-29 EU summit to discuss how they will work together towards reaching a banking union to stop the process of asking for bailouts to salvage troubled banks.  

Investors are waiting for a clear and decisive plan on methods to halt the turbulence in financial markets on the back of the worsening fiscal situation in Spain which caused a rise in borrowing cost in Spain and other euro area nations.

Last week, euro area Finance Chiefs showed disagreement regarding installments of the Greek aid and the plan to rescue Spanish banks.

The focus meanwhile is with Spain and the request for aid to rescue for its stricken banks which need 62 billion euros for recapitalization according to the latest independent audit, less pessimistic than previously expected.

On the other hand, discussions may include Greece, after the formation of a new coalition government last week, to tackle bailout terms and austerity measures adopted by the debt-laden country. 

"There would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries," Italian Prime Minister Mario Monti said last week.

Speculations are mounting that sooner or later the euro area`s third-biggest economy will ask for a bailout amid denials from Monti that his country will not ask for aid despite the accumulating huge debt and the rise in borrowing cost above 6%. 

Regarding fundamentals, data released last week was very disappointing, causing the euro to record a weekly drop versus the dollar; European manufacturing shrank at the fastest pace in three years this month while German business confidence plunged to the lowest level in more than two years in June.

This week, euro area economic confidence is predicted to show a drop to 90.0 in June from 90.6 in May as the escalating debt crisis damped confidence in the euro region.

Also, eyes will track the French growth figures as the first quarter`s final reading is estimated to remain unrevised at 0.0% on the quarter and 0.3% on the year.

In the U.K. , the British economy will release also GDP final reading for the first quarter which will remain unrevised at -0.3%, to confirm the U.K. entered a technical recession, following two consecutive contractions. 

U.K. public sector net borrowing excluding interventions is estimated to reach a deficit of 11.8 billion pounds from a prior surplus of 16.5 billion pounds.

In June BoE policy makers preferred to hold monetary policy to watch the latest developments in the euro, King referred that adding stimulus “is growing,” where he said they are working with the Treasury on a new liquidity facility to aid banks and a credit-easing operations which may boost lending in the economy up to 80 billion pounds with 5.0% rise in lending.

In the same vein, minutes of the June meeting showed a change in policy maker`s opinion regarding the size of the stimulus as four members of the MPC, including the Governor, David Miles and Adam Posen, preferred to increase the size of the asset purchase programme by £50 billion to a total of £375 billion, while Paul Fisher called for a boost by £25 billion to a total of £350 billion.

MPC members judged that recently uncertainty regarding economic outlook had increases while inflation risks had receded, which may suggest seeing more asset purchasing in the coming period.