The European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as President Mario Draghi signalled the ECB won't compromise on key principles to keep Greece in the euro area.
The Frankfurt-based ECB said it will push the responsibility for lending to some Greek financial institutions on to the Greek central bank until they have sufficiently boosted their capital. "Once the recapitalisation process is finalised, and we expect this to be finalised soon, the banks will regain access to standard Eurosystem refinancing operations," the ECB said.
The move comes after Draghi acknowledged for the first time that Greece could leave the monetary union.
While the bank's "strong preference" is that Greece stays in the 17-nation euro area, the ECB will continue to preserve "the integrity of our balance sheet", he said.
"A Greek exit was seen as an absurdity up to now," said Thomas Costerg, an economist at Standard Chartered Bank in London.