Greece's decision to give a Christmas bonus to its 1.6 million pensioners has riled its euro zone creditors.
Its European creditors decided on Wednesday to suspend the implementation of short-term debt relief measures after the Greek government announced additional spending on pensions - an action that European partners deemed as "unilateral" and disrespecting the efforts agreed under the country's 86 billion euro ($89.75 billion) bailout program.
"Following recent proposals by the Greek government to spend additional fiscal resources for pensions and VAT (Value Added Tax) our governing bodies have put their decisions temporarily on hold," a spokesperson of the European Stability Mechanism – a euro zone financial assistant agency - told CNBC via email.
The current deadlock has raised pressure on Greek bonds on Thursday morning, sending the 10-year bond yields up by 5 basis point. On Wednesday, the 10-year paper climbed more than 30 basis points. But the impasse is set to bring consequences also in the medium-term.
"If (Greece's Prime Minister) Tsipras goes ahead, this would further antagonize the EZ (euro zone) creditors, putting at risk the promised short-term debt relief. On the other side, giving in to the creditors' pressure would make Tsipras look amateurish at best, and at worst, further undermine his credibility and standing domestically," Wolfgango Piccoli, co-president of Teneo Intelligence said in a note on Wednesday.
The Greek government has seen a sharp fall in its popularity as it implements the controversial reforms under the country's bailout program.