The ability of Greece and other struggling Eurozone countries to remain within EMU may depend as much on ECB support as any multilateral assistance arranged between governments.

Banks in a country perceived to be at risk of being forced out of EMU are likely to suffer an outflow of funds. The banks, in turn, will attempt to cover any funding shortfall by increasing their borrowing from the ECB.

Under current generous arrangements, banks are able to borrow from the ECB in unlimited amounts at a fixed rate against collateral rated down to BBB-. ECB President Trichet's confirmation in January of the central bank's intention to return the minimum collateral requirement to its pre-Lehman level of A- at the end of 2010 contributed to recent pressure on weaker sovereigns.

ECB support has, until now, mitigated sovereign debt problems, since banks in Greece and elsewhere have been able to purchase bonds issued by their national governments and use them as collateral to obtain cheap central bank funding. Without bank buying, yield spreads would have widened earlier and by more.

ECB lending to banks via monetary policy operations rose from €465 billion in mid 2007 to €750 billion by the end of last year. There was a simultaneous increase in banks' reserves at the ECB from €183 billion to €396 billion, partly reflecting the circulation of funds obtained by weaker banks back to stronger institutions, which redeposited them with the central bank.

Net ECB lending to banks, therefore, rose from €281 billion in mid 2007 to €354 billion by the end of 2009.

It is reasonable to suspect that this net lending has been directed disproportionately to banks in weaker Eurozone economies. The ECB does not publish a breakdown but an indication of country exposures can be obtained from balance sheet statements of national central banks.

The Bank of Finland, for example, is likely to lend only to Finnish banks. In some countries, the balance sheet statement explicitly separates transactions with domestic and other Eurozone banks.

The chart shows estimates of net lending by national central banks to local banks in the original 11 Eurozone members plus Greece (which joined in 2001) at the end of 2009, derived from these balance sheet statements. The blue bars are actual figures while the red bars are the amounts that would be implied if total ECB lending were distributed according to GDP weights.

The excess of the blue over the red bar, therefore, is a measure of the extent to which banks in a particular country are unusually reliant on ECB support.

Irish and Greek banks stand out as especially dependent on ECB funding. They account for one-third of total ECB net lending versus a combined GDP weight of 5%. Irish banks are borrowing an amount equivalent to 46% of Irish annual GDP; the corresponding figure for Greece is 17%.

The Central Bank of Ireland's net lending is inflated by transactions with international banks located in Dublin's International Financial Services Centre. Excluding institutions with predominantly foreign business, however, the total still amounts to €67 billion or 41% of GDP.

Net lending to Spanish banks is also above the implied level but amounts to a much-lower 5% of Spanish GDP. Borrowing by Portugese banks is in line with the Eurozone average while Italian banks appear to be net lenders to the ECB, i.e. their reserves exceed their borrowing.

Surprisingly, net lending to banks by the Bundesbank is greater than implied by Germany's GDP share. In this case, however, the balance sheet statement does not separate transactions with domestic and other Eurozone institutions – the total may conceal loans to banks headquartered in weaker Eurozone countries.

Greek banks may have suffered a further outflow of funds as a result of the current crisis. Reliance on ECB funding may soon approach the Irish level.

The ECB must continue to offer unlimited support if a full-scale run on banking systems in weaker Eurozone economies is to be avoided. The plan, however, to raise the minimum collateral requirement back to A- at the end of the year suggests that some within the central bank oppose a further increase in its exposure to dubious credits and could baulk at a massive Greek rescue operation.