Greek banks in focus after ECB stops accepting its bonds

Greece's economy remained heavily in focus on Thursday (February 5) after the country's finance ministry said its banking system was protected through its access to emergency liquidity assistance (ELA) available from the domestic central bank, after the European Central Bank (ECB) said it would stop accepting Greek bonds in exchange for funding.

The ECB abruptly cancelled its acceptance of Greek bonds in return for funding on Wednesday (February 4), shifting the burden onto Athens' central bank to finance its lenders and isolating Greece unless it strikes a new reform deal.

The move, which means the Greek central bank will have to provide its banks with tens of billions of euros of additional emergency liquidity in the coming weeks, was a response to what many in Frankfurt see as the Greek government's abandoning of its aid-for-reform programme.

The Greek finance ministry said the ECB's decision puts pressure on the Eurogroup to reach a deal that would be "mutually beneficial" for both Athens and its eurozone partners.

The ECB's decision came just hours after Greece's new finance minister Yanis Varoufakis emerged from a meeting with ECB President Mario Draghi to claim that the ECB would do "whatever it takes" to support member states such as Greece.

In stark contrast, the ECB move, which required the support of a majority of central bank chiefs across the eurozone, shows widespread dismay with the new Greek government's plans not only in Frankfurt but across the 19-country bloc.

Greece's bailout from the eurozone runs out at the end of February.

Unless it is formally extended, Athens will not receive a final aid tranche of €1.8 billion or be eligible to seek a further easing of eurozone loan conditions.