The central bank boosts emergency funding available to Greek banks Getty ImagesLiquidity is crucial.The European Central Bank isn’t ready to withdraw a lifeline to Greece’s crippled banking sector, boosting hopes that Greece and its creditors will negotiate an end to a debt standoff. News reports on Thursday said the ECB’s Governing Council agreed to raise the limit on the amount of funding Greek banks can tap through a program known as emergency liquidity assistance, or ELA, by 5 billion euros ($5.7 billion), pushing the ceiling to €65 billion. An ECB spokeswoman said the central bank had no comment on the reports. The news boosted the euro EURUSD, +0.22% , which traded at its highest level versus the dollar in nearly a week. Analysts said the development merely underscored the idea that European officials still see room to resolve the debt standoff with Greece’s new government. Greek stocks added to gains after the news, pushing the country’s main stock index GD, +5.93% to a 6.7% gain. A decision to clamp down on emergency funding would likely have come as a shock to financial markets. ELA is seen as an important source of leverage for eurozone officials in the negotiations, since an inability to tap emergency funding would potentially sink a Greek banking sector dealing with accelerating deposit flight. In a decision that took effect Wednesday, the ECB earlier this month said it would no longer accept junk-rated Greek government debt as collateral for cheap funding. It also said, however, that Greek banks could continue to use the debt as collateral for funding via ELA, which is administered by the Greek central bank. Under ELA, the pledged collateral remains on the books of the national central bank rather than the ECB. The ECB, however, has final say on how much liquidity can be granted. Talks in Brussels Wednesday between eurozone finance ministers, along with the heads of the ECB and International Monetary Fund, produced no breakthroughs, even failing to produce a customary joint statement. Greece is resisting calls to extend the terms of its current bailout program, in line with the new government’s antiausterity campaign pledges. European officials are resisting Greece’s call for a bridge loan that would provide time to work out details of a new program. Greece’s current program expires on Feb. 28, and Athens is seen running out of money within weeks. Analysts said a failure to make progress nearer the deadline could prompt the ECB to begin using emergency liquidity as a cudgel in the negotiations, perhaps as early as next week if another meeting of eurozone finance ministers scheduled for Monday produces no breakthroughs. “In the event of failure, we would expect the ECB to become more explicit on the timing of when ELA funding would be withdrawn or capped,” said George Saravelos, strategist at Deutsche Bank, in a note. “Ultimately, the alternative of ELA withdrawal and eventual capital controls for Greece is worse for all sides involved. But whether progress can be achieved under very pressing deadlines and large differences of opinion on the underlying policy path between the two sides remains to be seen,” he said. William Watts