Greece defied its international creditors yesterday, refusing to cut pensions or ease layoffs to meet their demands, dimming prospects of progress next week towards securing desperately needed financial aid.

Despite efforts by European Commission President Jean-Claude Juncker to coax leftist Prime Minister Alexis Tsipras into moving on two key conditions for releasing EU/IMF bailout funds, Greek government spokesman Gabriel Sakellaridis said lenders could not expect Athens to make all the concessions.

Sakellaridis said Greece wants the Eurogroup ministers to recognise progress towards an agreement in a joint statement on Monday, giving the European Central Bank leeway to let Athens sell more short-term debt to Greek banks. That would ease the immediate funding crunch, helping the government make a €750 million payment to the International Monetary Fund on May 12 and pay wages and pensions later.

However, sources familiar with the deliberations said the ECB was highly unlikely to make such a move unless the eurozone ministers set out a very strong prospect of releasing the frozen bailout funds.

“We’re nowhere near that as things stand today,” said an official close to the so-called Brussels Group negotiations between Greece and European Commission, ECB and IMF.

The central bank on Wednesday raised the amount of emergency liquidity assistance Greek banks can tap to counter deposit outflows and held off from tightening conditions for collateral they must present. But without a political deal, the ECB could toughen its stance in the next two weeks, the sources said.

Confidence between Athens and its eurozone partners is at a low ebb after three months of radical rhetoric, obstruction of EU and IMF officials on the ground, contradictory policy statements and obdurate negotiating tactics.

In frenetic diplomacy ahead of Monday’s meeting, Juncker said he discussed Greece with ECB President Mario Draghi by telephone yesterday.

If I had to say that ‘Grexit’ was an option, what do you think would happen on the financial markets?

Asked about the risk of a Greek default and exit from the currency area, the EU chief executive said: “If I were to say that “Grexit” was an option, what do you think would happen then on the financial markets?”

Greek Finance Minister Yanis Varoufakis, sidelined from the conduct of the negotiations, said in Brussels yesterday he expected a deal within days or weeks, which should include privatisations, reform of the pension system, the judiciary and value added tax.

Reprising comments that have made him a leftist hero but infuriated eurozone partners, Varoufakis said Greece should never have been given a bailout in 2010 and Germany should come to terms with the failure of the previous programme.

He charged that 91 per cent of the bailout funds had gone to repay mostly northern European banks.

Varoufakis also said a Greek exit from the euro was “a forbidden thought in our minds” because it would eventually bring the whole single currency project down.

The Greek Parliament passed a law yesterday allowing the rehiring about 4,000 cleaners, school guards and other public sector workers laid off or earmarked for dismissal under austerity cuts imposed by the creditors.

While not against the letter of the bailout, which allows Athens to hire one public employee for every five who leave, the move combined with the revival of shuttered public broadcaster ERT and other symbolic steps has irked eurozone negotiators.