So people transferred their deposits to other banks, and those other banks wouldn’t redeposit/lend those euro back to the Greek banks via the interbank market, at any rate of interest.
So instead the lost deposits were replaced by what functionally are deposits from the ECB via what’s called the ELA. What’s wrong with that? Why have an interbank market at all? Why not simply let banks have debits/deposits from the ECB as needed as long as they are deemed adequately capitalized and in good standing by that same ECB? And no other entity has the access and authority to fully regulate and supervise, qualifying it regarding the decision of providing ‘liquidity’.
The way I say it is ‘the liability side of banking is not the place for market discipline.” Hopefully they know this and don’t decide to punish privately owned ECB member banks for sins of their govt.
On Monday, ECB President Mario Draghi told European lawmakers that, so far, the bank had helped out Greek lenders to the tune of 118 billion euros ($133 billion) – about 66 percent of Greece’s overall economy. At the end of 2014, that sum was only half the current level.