The European Central Bank reinstated Greek banks' access to its cheap funding operations yesterday after more than a year on an emergency lifeline, and said it would examine later whether to add Greek debt to its asset purchases.

The restoration is a big step towards normalising an economy that is still in recession, weighed down by capital controls and adjustments related to Greece’s third bailout since 2010, agreed last year and worth up to €86 billion.

The ECB said it “acknowledges the commitment of the Greek government to implementing the European Stability Mechanism macroeconomic adjustment programme and, therefore, expects continued compliance with its conditionality”.

Greek banks lost their access to the ECB's regular funding operations early last year when Athens came close to being ejected from the euro zone. After bringing his nation back from the brink, prime minister Alexis Tsipras has pushed through a slew of painful measures, including a pension reform and the privatisation of state assets such as ports and regional airports.

A decade-long economic contraction has wiped out over a quarter of Greek GDP since its peak in 2007.