Spain has formally requested aid for its ailing banking sector on Monday. 36.5 billion euros of bailout funds, including 2.5 billion euros for the “bad bank", are due to be released on December 12.

Four nationalized Spanish banks will be the recipients of the funds: 18 billion will go to Bankia; 9 billion to CatalunyaBanc, 5 billion to Nova Caixa Galicia; 4.5 billion to Banco de Valencia. The release of the aid is expected to be approved by the Eurogroup during their monthly meeting today in the European afternoon.

Even though it is not the full sovereign bailout request awaited by the markets, the news caused the euro to spike to the 1.3075 region, a new six-week high against the dollar.

Conditions of Greek debt buyback plan revealed

Greece has unveiled the details of its bond buyback plan, ahead of the Eurogroup meeting on Monday. According to the document released by the Public Debt Management Agency, the buyback will be carried out using a modified Dutch auction system: private investors are given the chance to swap the Greek bonds their hold for between 40.1% and 32.2% of their nominal value.

The bond buyback, on which Greece is prepared to spend 10 billion euros, is subject to a financing agreement with the EFSF, which provides funding for it. Prices of bonds vary by maturity: 38.1c for 2023, 30.2 for 2042. Investors can sign up for the buyback until December 7, while the settlement is scheduled for December 17.

The debt swap plan plan is a part of the bailout package for Greece, agreed upon at the Eurogroup meeting last week. The release of the next, 44 billion euro aid for the indebted country depends on its successful completion.

Merkel no longer discards losses on Greek debt

Weekend headlines suggest German Chancellor Angela Merkel may be re-thinking its stance over future Greece's debt haircuts, after she said on Sunday this is an option to consider, although not until the ongoing rescue program shows Greece's budget turned into a surplus.

Since last Tuesday's deal to ease the mammoth-size debt burden that the Greek government suffers, so that its debt to GDP ratio can come down to 126.6% or thereabouts by 2020, Germany's posture on write-downs of Greek debt has been firm, saying that it would be illegal to pursue such scenario.

While it is hard to conceive Greece can be back on a sustainable debt path unless haircuts are part of the present bailout deal, from a political standpoint, the risk is too high for Angela Merkel to give consent on this, ahead of 2013 German federal elections, as she seeks to be re-elected for a third mandate.

"If Greece one day handles its revenues again without taking on new debt, then we must take a look at the situation and assess it", although she was reportedly very firm that such outcome "is not going to happen before 2014/2015 if all goes to plan," Merkel told the Bild am Sonntag newspaper.