Bank customers queue to withdraw cash from an ATM in Athens, Greece, on Friday. Photo: Bloomberg

London: A Greek banking collapse has been temporarily averted after the European Central Bank pumped in a huge new injection of emergency funds, halting the need for capital controls this weekend.

The central bank was forced to intervene on Friday as a further €1.2 billion ($1.75 billion) was pulled out of the country's bank later in the week. Deposit flight soared to €4.2 billion as full-blown panic over the country's eurozone future set in.

A young woman walks past a graffiti acknowledging Germany's role in propping up Greece. Photo: AFP

The ECB took the unusual decision to raise the emergency liquidity assistance (ELA) for the second time in the space of three days. The ceiling on ELA was raised by up to €3 billion, according to reports, and came following a request from the Bank of Greece.

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The Frankfurt-based central bank took the drastic action after its officials warned European finance ministers that Greece's banks may not be open for business on Monday. ELA funding is one of the last critical links keeping Greece in the single currency. Without the funds, Greece would be likely to find itself in the midst of a bank run, forcing the Leftist government to impose draconian capital controls to stem the flight.

Such measures, which include deposit withdrawal limits, were last seen in the eurozone in 2013 in Cyprus after the ECB had threatened to cut the life support for Nicosia's financial system.

A Greek Orthodox priest walks past the headquarters of Greece's central bank, in Athens on Friday. Photo: Bloomberg

The drip-feed of cash will be reviewed by the ECB's governing council on Monday, when EU leaders and finance ministers convene for another, increasingly desperate attempt to thrash out their differences with Athens.

Donald Tusk, the man chairing the emergency summit of European leaders, confirmed Athens would be delivered an ultimatum deal as its future reached a "critical" point, saying the "game of chicken" over the Greek debt crisis had to end.

"We are close to the point where the Greek government will have to choose to accept what I believe is a good offer for support, or to head towards default," said Mr Tusk.

Greek Prime Minister Alexis Tsipras. Photo: Bloomberg

He added that the summit would not produce a final resolution to the five-month impasse, with any ultimate decision remaining with eurozone finance ministers. "There is time, but only a few days. Let us use them wisely," said Mr Tusk.

Meanwhile, George Osborne, the Chancellor, said negotiators were now "preparing for the worst".

Slovakia's finance minister Peter Kazimir warned there were just 72 hours to prevent a fatal Greek "accident". "What has to come in the coming 72 hours is a Sisyphean task on both sides to prevent 'accident'," he said. "Athens needs to move now."

Earlier this week, ECB president Mario Draghi said there was no ceiling on the liquidity assistance available for the Greek financial system as long as Athens remained in a bail-out and banks remained solvent.

This resolve is likely to be tested in the coming days as Greece's rescue program expires on June 30 and the country hurtles towards a default on its international creditors. Uncertainty over the country's future has also seen tax revenues collapse. Unpaid taxes rose to €1 billion in May, taking the total outstanding in tax past €5 billion so far this year.

Friday's reprieve was evidence the ECB was not yet "willing to pull the trigger on Greece", said Carsten Brzeski of ING. "It would have been possible for the ECB to blackmail Greece into capital controls, but we're not there yet," he said. "[ECB President] Mario Draghi is not yet willing to take a political decision."

Even if the ECB does not decide to pull the plug on ELA at the end of the month, the institution still has the tools to push Greece towards capital controls, warned Francois Cabau of Barclays. One such tool in the ECB's armoury is a tightening of the collateral rules it imposes on the banks in return for the emergency cash.

"If no progress is made before the end of the month, we would expect that from July the ECB would increase the haircut sufficiently to force Greek authorities to impose capital controls," said Mr Cabau.

Greece's creditor partners rounded on the country as another round of talks collapsed in acrimony on Thursday. IMF chief Christine Lagarde warned the Fund would dispense with its usual protocol in the event of non-payment, and revoke the 30-day grace period afforded to a debtor country which misses its payment.

Head of the eurozone's bail-out fund Klaus Regling also warned his institution could force immediate repayment of all its outstanding debts on July 1 if Greece fails to make its dues. The European Financial Stability Fund is Greece's largest creditor, owning 40 per cent of Greek debt, worth €131 billion.

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The Daily Telegraph, UK