The European Central Bank has given the green light to make up to €60bn in emergency liquidity available to Greek banks, according to a source close to a national central bank.

The source confirmed a corresponding report in the daily Die Welt. 

Greece's borrowing rate has soared above the symbolic level of 10%, after the ECB last night moved to restrict the country's banks' access to a key source of cash.

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

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 €240bn EU-IMF bailout.

Reacting to the ECB's decision to end that exemption, the yield on Greek 10-year bonds had hit 10.051% on the secondary market by 8am Irish time, up from 9.678% yesterday.

Meanwhile, the country's Athex stock exchange fell by more than 9% in early trading to 768 points, before gaining slightly.

In an interview with French daily Les Echoson, ECB chief economist Peter Praet defended the move, saying the bank was being transparent and simply applying its rules.

"The conditions of access to liquidity from the European Central Bank are clear," Mr Praet said when asked about yesterday’s decision. "If the conditions are not met anymore, the ECB must draw the consequences."

Mr Praet said he was "not satisfied" with the current situation regarding monitoring of Greece by the Troika, but did not specify what changes he would like to see.

He also said there were the first indications of improvement of financial conditions in the euro zone, which he saw as a sign that the central bank's quantitative easing plan announced in January would work.

The euro exchange rate now better reflected the divergent economic situation between the euro zone and United States, he said, adding that the ECB could do more than QE if necessary but that he was confident QE would be effective.