Greek borrowing costs spiked and bank shares plummeted on Thursday after the European Central Bank (ECB) abruptly pulled the plug on its funding for the country's financial sector, in what Athens labeled an act of coercion.

The ECB decision to cancel its acceptance of Greek bonds in return for funding shifts the burden onto 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.

"Greece does not aim to blackmail anyone but will not be blackmailed either," A Greek government official said in a statement. "The ECB's decision ... is an act of political pressure to quickly reach a deal."

The Athens stock exchange plunged 22.6 percent at opening before recovering somewhat. Three-year government borrowing costs leaped more than 3 percentage points, to nearly 20 percent, leaving Greece shut out of the markets and making it very expensive for Greeks to finance their businesses or take out loans.

Greek banks have been given approval to tap an additional 10 billion euros in emergency funding over an existing ceiling if necessary, the official said.

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 program that 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 on Thursday Varoufakis meets Germany's Wolfgang Schaeuble, who holds the hardest line among the eurozone finance ministers.

European Commission Vice President Valdis Dombrovskis said Athens must extend its bailout program to gain time to negotiate a longer-term program.

"In the European Commission's assessment, the most realistic way forward is to ... extend the duration of the program for another couple months or half a year," Dombrovskis told the Reuters eurozone summit.

Varoufakis is unlikely to get any concessions from Schaeuble, and the ECB's decision came just hours after Varoufakis emerged from a meeting with ECB 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, obtained by Reuters, made clear Berlin wants Athens to go back on promises to raise the minimum wage, halt privatizations, rehire public sector workers and reinstate a Christmas bonus for poor pensioners.

"The aim is the perpetuation of the agreed reform agenda [no rollback of measures], covering major areas as the revenue administration, taxation, public financial management, privatization, public administration, health care, pensions, social welfare, education and the fight against corruption," the paper said.

The new 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.

Two Greek banks had already begun to tap the more costly emergency liquidity assistance from the Bank of Greece after an outflow of deposits accelerated after the victory of the hard-left Syriza party in the Jan. 25 elections, banking sources had told Reuters.

The health of Greece's big banks is central to keeping the country afloat.

With the Greek public determined to cast off the stigma of supervision by a troika of EU, International Monetary Fund and ECB inspectors, the semantics of any new arrangement may be crucial.

A source familiar with the Greek position said after the talks with Draghi, "We are thinking of a bridging program. You may not call it a program for political reasons but perhaps a contract."

Tsipras, 40, won power promising to negotiate a debt write-off, reverse some key reforms and end budget cuts. At home, his poll ratings are high, and the media are extolling his stance, but if he fails to deliver, that may change.

Reuters