Don't Make Us Do It: ECB Wants a Political Deal on Greece - Bloomberg Business

Don't Make Us Do It: ECB Wants a Political Deal on Greece - Bloomberg Business

The ECB is concerned that the liquidity support is in fact being used to keep the government itself in cash, through the recycling of short-term bonds, or T-Bills. That borders on direct monetary financing, banned under European Union law.

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Without political progress and continued funding, accelerated deposit flight and capital controls loom, according to Gabriel Sterne, head of global macro research at Oxford Economics in London.

“Cyprus has written a script, Greece’s could be similar,” he said in a note to clients. “Closing a nation’s banking system is probably the most economically destructive act that could be wrought in peacetime.”