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The European Central Bank is set to tighten the noose on Greece a day after the president of the Bank denied the institution was “blackmailing” Athens into agreeing to bail-out conditions.

According to reports, the ECB will move to officially ban Greek banks from increasing their holdings of the country’s short-term sovereign debt, in a bid to break a potentially toxic link between lenders and the stricken sovereign.   The restriction will place a further squeeze on the cash-strapped Greek government, which could run out of money to pay wages and pensions by the end of next month.  Speaking to the European Parliament on Monday, Mario Draghi denied the ECB was acting unfairly towards the Leftist government: “We haven’t created any rule for Greece, rules were in place and they’ve been applied,” said Mr Draghi.   The ECB has emerged as the chief disciplinarian among Greece’s three main creditors.  The central bank has so far rebuffed pleas to increase the issuance of treasury bills or to resume its ordinary lending to the country.  This toughened stance led to criticism from Athens who accuse the institution of “asphyxiating” the country.   In a letter addressed to the German Chancellor and Mr Draghi, Alexis Tsipras warned the Bank’s stance could turn a “small cash flow issue” into a “large problem for Greece and for Europe.”   Athens is also due to request a return of €1.2bn which was erroneously handed to creditors from a European rescue fund, as it races to avoid bankruptcy and make its debt obligations of €450m to the IMF over the next few weeks.   But the ECB’s fresh curb comes as depositors have rushed to withdraw their money from Greek banks. The Greek banks already hold dangerously large amounts of Greek government bonds, completely unjustified given the country's junk bond rating. They can only run this risk because the ECB is underpinning the Greek banks with ELA that is barely papering over their essentially bankrupt condition. The Syriza government is pressurizing the banks to accept further T-bills - having quite nakedly, politically, decapitated the leading bank directors and replaced them with their own quisling henchmen. More T-bills would only accelerate the banks' decline into default.  he ECB is not telling the banks not to hold the Greek T-bills it already has, but having asked them several times and had its requests ignored, is now ordering them explicitly not to buy any new ones. The ECB is the euro's central bank. It can give such an order. he Greek banks are not owned by Syriza. In its political desperation to hang onto power, it is cynically quite prepared to make life even worse for the Greeks just to try to make its polemic point.