Fears that debt-stricken Greece may be headed for a chaotic Eurozone exit loomed large as President Barack Obama met other G8 leaders for crisis talks in the United States on Friday.

The Group of Eight top economies came together as Greece faces its second election in just six weeks, putting its Eurozone future in doubt and dragging down Spain, where the government is struggling to keep its banks afloat.

Spain fell into recession in the first quarter of 2012 with a decline of 0.3 percent in gross domestic product (GDP), the same rate of contraction recorded late last year, official data showed on Thursday.

Final figures released by the National Statistics Institute (INE) confirmed preliminary data issued on April 30 and underscored the precarious state of the Eurozone’s fourth biggest economy as it battles 24.4 percent unemployment, a record high.

Moody's is set to 'significantly' downgrade 21 Spanish banks within a week, following a cut of credit ratings on Italian banks, the Spanish economic daily Expansion said on Wednesday.

"Sources in the Spanish financial sector are convinced that the agency will lower in a significant manner the ratings of numerous institutions," said the daily.

The United States and 18 other countries have started in Jordan what was described as the largest military exercises in the Middle East in 10 years, focusing on "irregular warfare," top officers said on Tuesday.

"Yesterday we began to apply the skills that we have developed over the last weeks in an irregular warfare scenario ... They will last for approximately the coming two weeks," Major General Ken Tovo, head of the U.S. Special Operations Forces, told reporters in Amman.

Spain managed to raise €2.9 billion ($3.8 billion) in a short-term bond auction on Monday, but concerns over the future of the euro currency union pushed investors to demand higher interest rates to lend the money and caused the Madrid stock market to plummet.

The Treasury paid a rate of 3 percent to sell €2.2 billion ($2.8 billion) in 12-month notes, compared with 2.6 percent in the last such auction April 17. It paid 3.3 percent to sell €711 million ($920 million) in 18-month notes, up from 3.1 percent.

Hundreds of demonstrators returned to a central Madrid square Sunday to demand the release of 18 people who were arrested earlier during an "Indignant" movement protest.

Spanish police had made the arrests early Sunday as they cleared the Puerta del Sol square after issuing an official warning to disperse late Saturday.

Spanish activists angered by grim economic prospects planned nationwide demonstrations Saturday to mark the one-year anniversary of their protest movement that inspired similar groups in other countries.

Spain is in deep economic difficulty, prompting fears it may need a bailout like Greece, Ireland and Portugal. It is in recession, and unemployment stands at almost 25 percent — the highest among the 17 countries using the euro. One in two Spaniards under the age of 25 are out of work.

Thousands of Spanish students take to the streets on Thursday to demonstrate against crisis cuts in education, the first in several days of social protests across the country.

The national Students' Union has called demonstrations in more than 50 towns, its leader Tohil Delgado told AFP, predicting that thousands of students and teachers would join in despite looming exams.

Spanish Defense Minister Pedro Morenes stressed on Tuesday his country’s commitment to reduce by 20 percent the number of Spanish troops in the United Nations Interim Force in Lebanon, reported the Kuwaiti news agency KUNA.

He told Spanish state television that the rest of the Spanish troops will completely withdraw from the international force in 2013.

European countries are discriminating against Muslims for demonstrating their faith, especially in the fields of education and employment, rights group Amnesty International said Tuesday.

In a report focusing on Belgium, France, the Netherlands, Spain, and Switzerland, Amnesty urged European governments to do more to challenge negative stereotypes and prejudices against Islam.