Both match are actually important and crucial to Real Madrid, if they win Atletico Madrid they go 4 points again above second position, if they draw it will be 2 points above and if they lose they go 2 points behind Atletico Madrid. Worse still, it's not only Atletico Madrid that Real Madrid should be weary of, Barcelona are fast approaching.
The match against Manchester City is also very important because a win at the Etihad will make them put one foot in the Champions League R16. With the injury crises that Real Madrid has right now, it's really going to be tough for them in the upcoming matches.
Real Madrid needs to be worried about this match because recently there results is not as interesting as Atletico Madrid because of the perfect wining stand of Atletico, i doubt if Atletico Madrid would have lost to Espanyol if they were in the place of real Madrid on the match because of how prepared they are this time, so is a bad call for real Madrid losing to Espanyol 1:0 because by now the tension that would have accompany them on this match against Atletico wouldn't have been high because they would have been having in mind that even if they loss they are still in a perfect point, real Madrid and Atletico Madrid are the two strongest, so draw will be fine for real Madrid against Atletico tomorrow.