AP, ICN, EL MUNDO

LONDON - In the latest hit for a euro-zone economy, Fitch ratings agency downgraded Cyprus' sovereign credit grade to junk status, lowering the country's rating by one notch to BB+ from BBB-, AP reports.

"Fitch acknowledges that its estimates of the losses and capital needs of Cypriot banks are subject to considerable uncertainty and are conservative," the agency said. "Nonetheless, in Fitch's opinion, Cypriot banks will require substantial injections of capital in order to secure confidence in their financial stability."

The downgrade comes amid concerns after Spain officially asked for an aid for its troubled banking sector which is suffering from large amount of bad loans, ICN reports.

Madrid-based daily El Mundo reported that European officials are set to arrive in the Spanish capital "very soon" to hammer out the details of the conditions that will be attached to the bank rescue.

Worries about Cyprus and Spain are intensifying before this week's much awaited EU summit, where European leaders will try to reach an integrated banking union and more flexibility in how the European rescue fund can be applied.