The German government ordered a freeze on Thursday on bank accounts in the country held by the Libyan Central Bank and the Libyan Investment Authority, aiming to cut off potential sources of funding for Muammar Gaddafi.

The economy ministry said the move was in response to the European Union’s decision this week to clamp down on Libyan state banks controlled by Gaddafi. The ministry’s action also covers the Libya Africa Investment Portfolio and the Libyan Foreign Bank.

"Access to money of the Libyan Central Bank, Libya Africa Investment Portfolio, Libyan Foreign Bank and Libyan Investment authority is forbidden until further notice," said the ministry, adding that the move was taken in coordination with the German foreign and finance ministries and the Bundesbank.

Earlier this week the EU decided to step up financial sanctions against Libyan leader Gaddafi, his family and some of his aides and supporters.

Gaddafi's forces launched a fresh bombardment on the eastern Libyan oil town of Ras Lanuf on Thursday, a day after warplanes were reported to have struck another oil port, rebels and witnesses said.

The banks affected by the freeze "are controlled by Muammar Gaddafi and are a potential source of financing for his regime", said the German ministry in a statement.

The targets of the new EU financial sanctions include the $70bn LIA, a sovereign fund that has used oil and gas revenue to invest in prominent European assets including banks and a defence company.

Europe has also placed a travel ban on the Libyan leader and his family and followers, as well as imposing an arms embargo and ban on exports of equipment such as riot gear and tear gas that could be used by his security forces against rebels.