Greece’s radical government has confirmed that it will run out of money by the end of the month unless its creditors agree to release €7.2bn (£5.1bn) in bailout funds.

As Athens prepared to meet its lenders on Thursday amid an increasingly sour atmosphere of claims and counter-claims, lead negotiator Euclid Tsakalotos conceded that the country does not have the funds to make a €1.6bn payment to the International Monetary Fund due on 30 June.

Athens delayed a payment to the IMF earlier this month, saying it would take advantage of a technical loophole, allowing it to “bundle” three tranches into a single €1.6bn payment. But Tsakaolotos has now admitted that Greece simply does not have the money.

He also underlined the fact that while Greece is still willing to make concessions to its lenders, it will not make pensions cuts — a key point of contention in the negotiations.

Tsakalotos’s intervention came after Yannis Stournaras, governor of Greece’s central bank, warned that his country is on the brink of an “uncontrollable crisis”.



Stournaras used his annual report to the Greek parliament to warn that failure to reach a deal would “mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union”.

His remarks came amid growing fears that Greece may be unable to avoid leaving the euro. In the UK, a spokeswoman for David Cameron said the government was “stepping up” its preparations for a possible “Grexit”, which she said was a serious economic risk to the UK.

“We don’t go into the specifics of these plans but of course they will be looking at how we make sure we have looked at the impacts on business, the banks and the financial sector and tourists,” she added.

Stournaras warned that failure to reach a deal would result in a deep recession and soaring unemployment in Greece, and force it to be “relegated to the rank of a poor country in the European south”.

He also called on Greece’s creditors to honour their promise to offer debt relief, as part of the second bailout of the country in November 2012. Any new deal must be “based among other things on our European partners’ delivery on their commitments in November 2012 to Greek debt relief, which now need to be specified in greater detail”, he argued.

Hopes of a deal have been severely tested in recent days by the increasingly bitter war of words, with the Greek prime minister, Alexis Tsipras, accusing the country’s creditors of “pillaging” Greece, while European commission president, Jean-Claude Juncker, previously seen as sympathetic to Greece’s cause, said the government was misleading the Greek public about the negotiations.

However, Greece received public support on Wednesday from the Austrian chancellor, Werner Faymann. Austria has tended to take a hard line in previous rounds of Greek debt talks but Faymann, a social democrat who has toured Greek schools and hospitals, criticised some of the measures being demanded by Greece’s creditors: the European Central Bank, the European commission and the International Monetary Fund.

“I know there were a number of proposals, also from the institutions, that I also don’t find in order. High joblessness, 30-40% [with] no health insurance and then raising VAT on medicines. People in this difficult situation cannot understand that.”

Separately, the European Central Bank is due to decide later on Wednesday whether to raise the ceiling on the amount of funding – known as emergency liquidity assistance (ELA) – that Greece’s central bank is allowed to offer to its struggling private sector banks. The limit has repeatedly been increased in recent weeks to €83bn, to prevent Greek banks from collapsing amid fears of capital flight.