The euro tumbled against majors, especially safe-haven currencies, after Spain had formally requested a bailout to salvage its ailing banks, before an EU summit this week.

Concerns increased after Spain has asked for an aid for its troubled banking sector which is suffering from large amount of bad loans, according to Luis de Guindos, the Spanish Minister for the Economy and Competitiveness who confirmed the request in a statement on Monday. 

So far, the specific amount of the bailout has not be stated, where the latest figures by independent audits announced last week referred to the need of 62 billion euros for recapitalization.

The Eurogroup agreed to provide Spain as much as 100 billion euro aid package, yet whether the funds will be provided to Spanish banks directly or via the government has not been announced.

For sure, Spanish officials will try to reach a perfect deal with European officials that would include a low interest rate and a long reimbursement period to ease jitters in markets after the rise in Spain`s 10-year bond yield to above 7%, a rate which forced Greece, Portugal and Ireland to ask for international bailouts.

In a similar situation, Cyprus was in the headlines as well. Where in addition to the 1.8 billion euros required recapitalizing for Cyprus Popular Bank, Cyprus banks will need as much as 4.0 billion euros to recapitalize the nation’s banks, according to Fitch`s statement which included the downgrade for the Republic of Cyprus to BB+ junk status with negative outlook. 

Worries are intensifying before the awaited summit, especially as the mini-summit that took place on Friday showed a split between the French, Spanish and Italian leaders on the one hand and Merkel on the other.  

At this week`s summit, European leaders will try to bridge the deference between them towards reaching an integrated banking union and more flexibility to the usage of the European rescue fund, where the issuance of common euro bonds may be discussed despite the German rejection to the proposal.    

Furthermore, tomorrow eyes will track firstly a debt selling by both Italy and Spain as the former will auction 2016 and 2026 bonds and 3 billion euros of zero-coupon securities while the later will sell three- and six-month bills.

In the FX market, the euro slipped to 1.2482 against the U.S. dollar compared to the day`s opening of 1.2547.