Greece Risks Insolvency, Warns Bailout Chief

Greece has been warned time is running out over reaching a deal on bailout reforms which threatens to block further rescue funds.

Without agreement, Athens would not get any new loans and risked insolvency, said Klaus Regling, the head of the European Stability Mechanism (ESM), which is the eurozone's permanent bailout fund.

The Greek government has said it plans to meet its debt obligations but needs aid urgently to be able to do so after several senior officials insisted Athens had no money to pay a loan instalment due next week.

Creditors want Greece to accept tough reforms and spending cuts to receive the outstanding funds.

Mr Regling told Germany's Bild newspaper: "There is little time left.

"That's why we're working day and night for an agreement.

"Without an agreement with the creditors, Greece will not get any new loans. Then there's a threat of insolvency.

"There are a lot of risks contained in that.

"Even missing a payment to the IMF would be dangerous. That would have an effect on other lenders like us.

"On the other hand, the rescue fund can only extend loans when reforms are implemented.

"That is also the case now and that's the only way Greece will be able to restore its economy's fiscal health."

With a freeze on bailout cash, Greece is running out of money to pay its bills.

It must repay four loans totalling €1.6bn (£1.1bn) to the International Monetary Fund next month, starting with a €300m (£212m) payment on 5 June.

A number of senior members of the Greek government have said it cannot afford to pay the IMF, and would prioritise paying civil servants and pensioners instead.

Athens has already threatened to default, arguing the country does not have the cash.

However, eurozone officials have dismissed this as a negotiating tactic to get financial aid released.

Refusing to cut wages and pensions has been one of the government's red lines since coming to power in January.

Its anti-austerity stance comes against a backdrop of soaring unemployment and falling incomes during the six-year economic crisis.

Mr Regling said Greece would be in line to receive around €7.2bn (£5.1bn) once a deal was reached, including €1.8bn (£1.2bn) from the ESM.