I Think that the ECB Just Blinked

The European Central Bank has just increased emergency liquidy funding to Greek banks by €5 billion:

The European Central Bank (ECB) just increased the amount of emergency funding available to Greek banks by €5 billion — despite indications that the savers were pulling less of their money out in February.

On Thursday, Reuters reported that the ECB was extending the Emergency Liquidity Assistance that can be given to Greek banks from its current (self-imposed) maximum of €60 billion to €65 billion. However, its reasons for doing so remain unclear.

Earlier reports had suggested that fears of deposit flight, where Greek savers withdrew their money from banks and deprived them of a key source of funding, after the left-wing Syriza party took power and the ECB altered its rules to prevent Greek government debt (and government-guaranteed debt) from being used to access its emergency loan programme were failing to materialise. A survey of Greek banks found that although savers remained nervous about the new government's plans deposit outflows had slowed in February, according to Reuters.

What happened here is pretty clear.

The ECB tried to get tough and saw the beginnings of a bank run, and they reversed course because they knew that if there were a bank run in Greece, it would spread to the Southern tier of the EU, as people took out cash, or transferred money to banks in the north.

Merkel has been emphatic that a Grexit (Greek exit from the Euro Zone) would be manageable.

This shows that this is a delusion.