Europe blocks desperate Greek attempt to stay afloat
Eurozone says it is "legally impossible" to return €1.2bn in rescue funds to cash-strapped Athens
Athens requested a return of the funds it said were erroneously handed to creditors from Greece's own bank recapitalisation fund, the Hellenic Financial Stability Facility (HFSF).
The transfer was originally arranged by the previous Greek administration.
But eurozone offcials have blocked the claim, saying it is "legally impossible" transfer the money back to the debt-stricken country.
"There was agreement that, legally, there was no over payment from the HFSF to the EFSF," said a fund spokesman.
Germany's finance ministry was also reluctant to allow the release, claiming there was "no reason" to make the transfer.
The decision is a further blow to the Greek government's attempts to stay afloat over the next few weeks.
Athens has been scrambling to make repayments to its creditors and continue to pay wages and pensions. The government now faces another €450m cash squeeze at the beginning of April.
As part of its efforts to stay solvent, the Leftist government has also requested a €1.9bn transfer of profits held by the European Central Bank, from the holdings of its Greek debt.
So far, the ECB has rebuffed all Greek pleas to alleviate their cash squeeze. The central bank has moved to officially ban the country's banks from increasing their holdings of short-term government debt.
Greek banks are being kept alive through the provision of an expensive form of emergency liquidity (ELA) which is rapidly being used up as capital flees the country. The ECB decided to incrementally raise the limit on ELA to €71bn on Wednesday, according to reports.