Ratings agency S&P has downgraded Greece’s credit rating again, saying it expects its debt and other financial commitments will be “unsustainable”.

It has dropped long and short-term sovereign credit ratings to CCC+/C from B-/B and says its outlook is negative. Markets use sovereign ratings to work out the interest rate at which investors should lend to a country.

The budget deficit – the difference between its revenue and spending – was 3.5% of GDP, compared with the prediction of 0.8%. The worsening finances of the government could see Greece’s creditors pushing for further austerity, experts said.

German Finance Minister Wolfgang Schaeuble warned that an agreement between Athens and its creditors was unlikely to happen any time soon.

The Syriza government is negotiating with the International Monetary Fund (IMF) and its eurozone partners in an attempt to lessen the burden of its debt repayments. A €750m ($800m; £540m) payment is due on 12 May, but the government will struggle to make it.

Athens faces a “choice between paying the IMF or paying the wages and pensions of its employees”, Raoul Ruparel, head of economic research at Open Europe, told the BBC.

“For a radical left-wing government such as Syriza, that is a very poisonous choice.”

The Greek economy has shrunk by 1% in six months, despite the twin benefits of a lower oil price and a weak euro..

Government finances, which appeared to be improving slightly last year, have now been dented by weaker economic activity and rising arrears on taxes.

Since the end of November 2014, Greek banks have lost about 14% of their deposit base to customer withdrawals and deposit outflows have continued.

The conditions have been made worse by the uncertainty over the negotiations between Athens and its main creditors – the IMF, the European Commission and the European Central Bank.

S&P said that economic prospects could deteriorate further unless Greece reached a deal over the next €7.2bn tranche of its bailout loan.

But time is running out.