Europe News

Greece 'in a corner' as Europe blocks payment

Greece's last-ditch attempt to get desperately-needed funds from its euro zone neighbors failed on Wednesday, but the country appears eternally optimistic that a list of reforms as yet to materialize will unlock vital aid.

Greece appealed for the European Financial Stability Facility (EFSF) to return 1.2 billion euros ($1.32 billion) it said it had overpaid when it transferred bonds intended for bank recapitalization back to the fund this month, Reuters reported Wednesday.

However, euro zone officials ruled that Greece was not legally entitled to the money, the news wire said.

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It marked the struggling country's latest effort to stave off a potential bankruptcy, and the rejection raises pressure on Athens to deliver a reform program by Monday, as promised.

Investors showed their concerns for Greece's precarious financial situation Thursday, when the Athens stock exchange traded down 3.5 percent.

Read MoreHow to protect your portfolio against Greece

"The clock continues to tick ever louder for the Greek government, as it continues to scrabble around for every last euro in an attempt to stay afloat on a day to day basis," Michael Hewson, chief market analyst at CMC Markets, said Thursday.

"Given some of yesterday's events it is slowly becoming apparent that the Greek government is slowly being pushed into a corner."

Misplaced confidence?

The government remains optimistic, however.

Economy Minister George Stathakis told a Greek television network Thursday that he believed the country could reach a deal with its euro zone neighbors early next week.

"I believe that at the beginning of next week we will have an agreement on the package of reforms the Greek government is proposing, and on the funding of the country," Stathakis told Antenna TV, Reuters reported.

That confidence may be misplaced, however. Greece -- the recipient of two international bailouts worth a total of 240 billion euros ($262 billion) -- continues to struggle amid a deteriorating debt situation, high unemployment and lack of structural reforms. Adding insult to injury, earlier this week it was reported that Greece was likely to run out of money by April 9, making its reform efforts even more crucial.

Read More'End of the road' for Greece as cash runs out?

It was granted a four-month extension to its current bailout program, which is overseen by the European Central Bank (ECB), International Monetary Fund (IMF) and European Commission, in February but a final tranche of aid from the program will only be released once concrete reforms are implemented a condition designed to pressure the new left-wing government to act quickly.

In a corner

Naeem Aslam, from AVA Trade, warned that Greece was "running out of options very rapidly to keep its daily operations floating."

He said the county was "highly likely" to run out of cash when another loan repayment was due to the IMF on April 9.

And Aslam stressed that the ECB too was "closing all the back doors for Greece to make sure they do submit a reform package which does make more credible sense by next week."

"What plans the game theory expert, the Finance Minister (Yanis Varoufakis) of the country, has up his sleeves, no one knows, but surely he is running out of option under the current circumstances," he said in a note.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld