On Friday, the European Central Bank turned up the heat on Greece ahead of a bailout program review by saying it will stop accepting Greek bonds and other collateral used by Greek banks to tap ECB funding, at least until after the review.
This move by ECB is seen by analysts as stepping up pressure on Athens to adhere to the commitments of its EU/IMF bailout and is expected to force banks of Greece to turn to their national central bank for Emergency Liquidity Assistance (ELA) funds, which will be more expensive than funds available in the regular liquidity operations of the European Central Bank.
Collateral exclusion was because of the expiration of a temporary 35 billion euro scheme agreed with Greece and euro zone leaders, the ECB said.
"The ECB will assess their potential eligibility following the conclusion of the currently ongoing review, by the European Commission in liaison with the ECB and the IMF, of the progress made by Greece under the second adjustment program," the central bank said in a statement.
"In this way the ECB could be putting pressure (on the Greek government) to bring about a positive review by the troika," Alpha Finance bank analyst Nikos Lianeris said. "If there is a positive review by the troika then the Greek banks will regain direct access to ECB funding."
Greek banks would be able to continue to get funding from the Greek central bank, said the ECB.
"There has been a switch to national central banks bearing the credit risk. This move is ... in line with what we've seen in the past," ABN Amro economist Nick Kounis said. "Once there is clarity, there would be a switch back to ECB financing."