Greece and Spain top agenda at Eurogroup meeting
Thousands demonstrated in Madrid on Sunday against reforms to the labour market.
Finance ministers from eurozone nations are to meet on Monday to discuss giving Greece's second bailout final approval.
The Eurogroup, which includes eurozone finance ministers, the president of the European Central Bank and European Commission chiefs, meets in Brussels.
Spain's financial status is also on the agenda.
Earlier this month, Spain said it would miss a deficit target of 4.4% of GDP for 2012 agreed with Brussels. It now expects the deficit to be 5.8%.
The head of the group of eurozone finance ministers, Jean-Claude Juncker, said they would discuss the situation but would not take any final decisions at Monday's meeting.
He called on Spain on to respect its 2013 public deficit target: "We start from the principle that Spain will and wants to achieve its 2013 budget target" of 3% of gross domestic product (GDP).
Spain was earlier praised by Germany's Finance Minister, Wolfgang Schaeuble.
Ahead of the Eurogroup meeting, he said: "Spain has made great progress. Financial markets also see it that way, but of course we're all still on a tough path."
Spain is planning 30bn euros ($39bn; £25bn) of spending cuts this year, at a time when the economy is contracting.
Sony Kapoor, managing director of the think-tank Re-Define, told the BBC: "Spain has got its back against the wall.
"Even small cuts to public spending can translate into steep falls in GDP, worsening the debt situation," he added.
"That point is increasingly understood at a European level and a compromise is likely."
The Spanish government is also under political pressure at home. Over the weekend, hundreds of thousands of people protested against government labour reforms.
Under the new rules, severance pay will be slashed and it will be easier for firms to opt out of national pay agreements negotiated by unions.
Debt swap
Finance ministers are also expected to give Greece their approval for a second bailout.
Greece took an important step towards that goal on Friday after it managed to win a crucial debt swap.
The Greek deal with banks and other lenders is the largest restructuring of government debt in history, clearing the way for the country to receive a bailout worth 130bn euros.
Germany's Mr Schaeuble said that the bailout deal would be signed off this week.
"This is a difficult path for us all, but progress over recent weeks and months shows we are on the right path," he said.
Despite that deal, Mr Kapoor maintains that Greece will have to keep up the pace of reform. "Greece will be put on short leash. Even small disbursements will need to be approved," he said.
"Most of Greece's problems lie in the future. The economy is still in free-fall, unemployment is rising and capital flight is large."
In a statement on Friday, Jean-Claude Juncker, president of the 17-nation Eurogroup, said "the necessary conditions are in place to launch the relevant national procedures required for the final approval" of its bailout.
The IMF will meet on 15 March to decide what it will contribute to the eurozone bailout.
Falling values
Under the debt swap, banks and other financial institutions have agreed to exchange their existing Greek government debt for new bonds, which are worth much less and pay a lower rate of interest.
The deal involves 172bn euros' worth of bonds, according to the Greek government website, with investors taking a total loss of up to 74%.
The new Greek bonds slumped in value on Monday, trading at 71-75% lower than face value on the secondary markets.
New Greek bonds with 30-year maturities issued with yields of 3.65% were yielding 13.57% on Monday, with investors demanding a far bigger percentage return on their investments.
Some lenders who lost money as a result of the swap will be compensated after the International Swaps and Derivatives Association classified the deal as a "credit event", triggering insurance payments.
Some investors bought a type of insurance against that happening. Those payouts could be worth in total up to $3.2bn, only a small fraction of the 105bn euros wiped-off Greece's debt burden.
In another development on Monday, lawyers in Germany representing 110 Greek bond holders said they had formed a class action group to sue banks and the Greek state following the bond swap.
A Hamburg legal firm said most of the investors had spent 100,000-500,000 euros on Greek paper, with the highest investment reaching 3m euros.
It did not name any of the banks it might target and the suit is likely to be filed in Washington.
It will claim banks failed to advise clients properly about the risks of Greek paper and it will seek compensation.
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