* Euro lower after EU summit * EU meet offered no immediate steps to stem crisis * Italian, Spanish bond sales this week in focus By Antoni Slodkowski TOKYO, Dec 12 (Reuters) - The euro dipped in Asia on Monday, and was expected to struggle going into the year-end after the European Union agreed on deeper economic integration but fell short of a convincing plan to deal a decisive blow to the euro area debt crisis. Except for Britain, the EU states decided at a summit to pursue stricter budget rules for the single currency area and to provide up to 200 billion euros in bilateral loans to the International Monetary Fund to help tackle the crisis. But uncertainty about the drawn-out process of implementing changes, a bitter divide between the UK and the rest of Europe, almost no mention of policies aimed at boosting the ailing European economy and no emphatic action on cash-starved European banks undermined the outcome of the summit. The euro, however, was given some support after a Reuters report that China planned a new $300 billion vehicle to invest in Europe and the United States, traders said. The currency reversed last session's 0.2 percent gains and fetched $1.3355, down from $1.3371 late in New York on Friday. It is now almost 6 percent below its October peak and 10 percent off its 2011 high of just under $1.50, struck in early May. "The summit addressed long-term problems of fiscal consolidation, but Europe is facing a pretty serious funding crunch in the weeks to come. There's no immediate solution to address this problem," said Teppei Ino, a currency analyst at the Bank of Tokyo-Mitsubishi UFJ. Analysts pointed to the reluctance of the European Central Bank to buy up bonds of debt-laden euro zone states, a move that could potentially calm wild swings in the area's bond markets that saw Italian debt yields soar to levels seen as unsustainable in November. Following the summit, which some had hoped would provide political cover for the bank to step in more aggressively, the ECB said it was capping its weekly bond purchases at 20 billion euros and was not considering any more substantial action. That is why traders said they were watching Spain and Italy very closely as the countries look to raise an estimated 7 billion euros in total through bond sales this week. On top of that, they said they were waiting for a response from Standard & Poor's which, right ahead of the summit, warned it may carry out a credit downgrade of euro zone countries en masse if they fail to move decisively to stem the crisis. The euro remained trapped within its well-trodden $1.3200-$1.3500 range seen since late November and technically appeared to be in a flag formation, with parameters at 1.3250-70 and 1.3460. The longer the 1.3250-70 base holds, the greater the risk of a break higher towards 1.3600, traders said. Such a temporary break could also happen because IMM data showed only a small reduction in the speculative short euro base, thus raising the potential for a short-covering corrective rally in the euro, analysts said. PINING FOR GROWTH While bilateral loans to the IMF will beef up its resources to help struggling euro zone economies when needed, the volume of the euro zone's bailout fund was still seen insufficient to safeguard core euro zone economies from contagion from the debt crisis. The capacity of the permanent bailout fund was capped and it was not granted a banking licence. Moreover, analysts said that even if bond yields stabilise, Europe is likely heading for recession. "No matter how you slice and dice things, in the context of a single currency regime, the tough budget rules and brutal austerity programmes embedded in the Stability Union will consign Europe to an extended period of recession, if not depression," Russell Jones, strategist at Westpac Institutional Bank in Sydney, wrote in a note. With the euro on the backfoot, the dollar index remained in the consolidation mode it has been in since its 6.7 percent rally from Oct. 27 to Nov. 25 ran out of steam. It was last up 0.14 percent at 78.74. But against the Swiss franc, the dollar climbed 0.4 percent and last changed hands at 0.9262 francs. Barclays Capital analysts said that with the Swiss economy facing severe strains from deflationary pressure and very weak growth, the balance could be shifting towards a hike in the Swiss franc peg versus the euro, which, according to them, "should at worst mean stable EUR/CHF and therefore higher USD/CHF." The dollar was flat on the yen, last trading at 77.63 yen . (Additional reporting by Lisa Twaronite in Tokyo, Ian Chua and Reuters FX analyst Krishna Kumar in Sydney)

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