The European Central Bank on Wednesday announced it would no longer allow Greek banks to use government debt as collateral for loans, depriving the banks of a key source of much-needed cash.
"Suspension is in line with existing Eurosystem rules, since it is currently not possible to assume a successful conclusion of the programme review," the Frankfurt-based ECB said in a statement, referring to ongoing talks between the new Greek government and its international creditors.
The announcement came just hours after new Greek Finance Minister Yanis Varoufakis held his first talks with ECB chief Mario Draghi, as part of the country's push to renegotiate Athens' 240-billion-euro ($270 billion) EU-IMF bailout.
Ahead of the talks in Frankfurt, Varoufakis told the German weekly Die Zeit that the ECB "should support our banks so that we can stay afloat", acknowledging that Greece was "a bankrupt country".
Greek debt has a junk credit rating and, under ECB rules, should not qualify as collateral for loans.
However, because of Greece's dire economic situation, it had been granted a waiver to that rule as long as Athens was deemed to be in compliance with the terms of its bailout.
Wednesday's ECB decision, which will come into effect on February 11, removes that waiver.