Shares across Europe have dive into the red after a warning came from Greece's finance minister that the debt-laden nation could run out of money in a couple of weeks.

Yanis Varoufakis warned his country's financial situation is 'terribly urgent' after eurozone finance ministers met in Brussels yesterday to discuss the final €7.2bn tranche of Greece's €240bn European Union / International Monetary Fund bailout.

Greece is struggling to meet repayment obligations and eurozone ministers said Greece had made 'progress' but more work was needed. Earlier, Greece began the transfer of €750m in debt interest to the IMF, ahead of a deadline.

The gloom spread to the trading desks of the major European stock markets: in London the FTSE 100 index fell more than 2 per cent at one point but recovered slightly to stand 114.2 points or 1.6 per cent down at 6,915.66 , while the blue-chip indices in Paris and Frankfurt were also 1-1.6 per cent off their opening marks.

But Jasper Lawler at CMC Markets said fear over a bond market rout is also causing the collapse of European stocks.

Gathering storm: Talks are highly unlikely to end in a new funding package for the government in Athens

'German bunds yields are rising faster than US treasuries and closing the yield advantage of US debt over European debt,' he said. 'US dollar-denominated assets are now becoming relatively less appealing than the equivalent European assets.

'This unwinding of the yield differential between treasuries and bunds is driving EUR/USD higher which in turn is causing a drop in the German DAX stock index.'

He expects Wall Street to open 'considerably lower' as a result.

The pound was flat against the euro at €1.39 after making rapid gains from the €1.34 rate it was trading at before the surprise general election result on Friday. Sterling fared better against the dollar, rising 1.5 cents to $1.57 - it's highest since December - on the back of strong UK industrial production figures.

Mr Varoufakis told reporters in Brussels last night, 'The liquidity issue is a terribly urgent issue. It's common knowledge, let's not beat around the bush. From the perspective [of timing], we are talking about the next couple of weeks.'

Greece has been lurching closer towards a humiliating exit from the single currency bloc.The talks with creditors are unlikely to end in a new funding package for the government in Athens as many key issues are still unresolved.

Fears are mounting that Greece will default on its debts – possibly forcing the country out of the euro.

The last time the Eurogroup of finance ministers met, in Riga last month, Greek finance minister Yanis Varoufakis was branded ‘a time-waster, a gambler and an amateur’.

Those discussions broke down after the Greek government failed to offer the reforms required to fix its economy in exchange for fresh financial support.

Greece desperately needs the next tranche of its bailout to survive – worth around £5.2billion – but is at loggerheads with Europe and the IMF over what is required to release the funds.

If Greece does not sign up to painful reforms in order to secure fresh funding, it may not be able to pay the £1.8billion it owes in salaries and pensions at the end of this month.

Timo Soini, who could become Finland’s next finance minister after the eurosceptic party he leads entered a governing coalition, said it would make sense for Greece to leave the common currency.

Asked if he would like to see Greece thrown out of the eurozone, he said: ‘That would perhaps be the clearest option for everybody, also for the Greeks.’

Italian finance minister Pier Carlo Padoan warned that ‘time is running out’ Greece.

Dutch finance minister Jeroen Dijsselbloem, who chairs the Eurogroup, said Greece has not done enough to earn more aid.