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ECB keeps Greece on tight funding leash ahead of referendum

By John O'Donnell

FRANKFURT (Reuters) - Euro zone central bank chiefs kept their existing cap on a funding lifeline to Greece in place on Wednesday, the ECB said, a move that keeps pressure on Greece as its lenders run out of cash.

The Governing Council of decision makers has pared back support to a bare minimum ahead of a bailout referendum that could decide Greece's future in the euro, but decided against cutting it further, for fear that it would further destabilize the banks.

As the central bankers gathered in Frankfurt, a defiant Prime Minister Alexis Tsipras urged Greeks to reject an international bailout deal, wrecking any prospect of repairing relations with Europe before the Sunday vote.

Tightening the Emergency Liquidity Assistance to Greek banks, used to make payouts, would have forced Greece to lower its 60 euros-a-day ($66) on cash withdrawals. That could have turned public opinion against the euro ahead of the referendum.

"The Emergency Liquidity Assistance ceiling for Greek banks was maintained at the current level," the spokesman said. Sources have told Reuters that this is about 89 billion euros.

The decision was taken at a meeting chaired by President Mario Draghi of euro zone central bank chiefs and his own executive in the ECB's Frankfurt headquarters.

A strict limit on cash withdrawals has prevented savers taking out large sums of money, which means that the current level of liquidity, used to make such payouts, may now be just enough to see Greek banks through the week.

Some have reservations. Germany's Bundesbank has long argued for the funding to be reined in but has been also cautious about insisting on any radical change at this delicate moment.

The Greek government ordered its banks to close and imposed capital controls after the ECB, which had been waving through more funding as withdrawals from Greek banks soared, froze it on Sunday.

($1 = 0.9052 euros)

(Reporting By John O'Donnell; editing by Larry King/Ruth Pitchford)