Greek borrowing costs leapt and bank shares were hammered yesterday after the European Central Bank abruptly pulled the plug on its funding for the country’s financial sector in what Athens labelled an act of coercion.

The ECB decision to cancel its acceptance of Greek bonds in return for funding shifts the burden on to Athens’ central bank to finance its lenders and marks a further setback for the government’s attempt to negotiate a new debt deal with its eurozone peers.

The Athens Stock Exchange FTSE Banks Index plunged 22.6 per cent at the open before recovering somewhat. Three-year government borrowing costs leapt more than three percentage points to nearly 20 per cent, leaving Greece utterly shut out of the markets.

Greek banks have been given approval to tap an additional €10 billion in emergency funding over an existing ceiling if necessary.

Greek Prime Minister Alexis Tsipras and his finance minister, Yanis Varoufakis, have spent this week touring EU capitals hoping to build support for a debt renegotiation and an easing of austerity measures under the country’s bailout programme which both say they have no interest in extending beyond the end of February.

They have found little or no backing in Paris, Rome, Frankfurt or Brussels and yesterday Varoufakis met Germany’s Wolfgang Schäeuble, the most hardline eurozone finance minister.

European Commission vice president Valdis Dombrovskis said Athens must extend its bailout programme to gain time to negotiate a longer-term programme.

“In the European Commission’s assessment the most realistic way forward is to... extend the duration of the programme for another couple months or half a year,” Dombrovskis said.

Varoufakis is unlikely to get any concessions from Schäeuble and the ECB’s decision came just hours after he emerged from a meeting with president Mario Draghi and declared the ECB would do “whatever it takes” to support Greece.

A document prepared by Germany for a meeting of EU finance officials made clear Berlin wants Athens to go back on promises to raise the minimum wage, halt privatisations, rehire public sector workers and reinstate a Christmas bonus for poor pensioners.

“The aim is the perpetuation of the agreed reform agenda, covering major areas as the revenue administration, taxation, public financial management, privatisation, public administration, healthcare, pensions, social welfare, education and the fight against corruption,” the paper said.

The Greek leaders have had a cool reception even in left-leaning countries such as France and Italy which Athens had hoped would support its case for debt relief.