Eurosystem gross lending to banks in euros rose by €8.8 billion last week to another new record, consistent with Greek banks continuing to suffer an outflow of private-sector funding (although other explanations are possible).

The gross figure comprises “lending related to monetary policy operations” and “other claims”, under which the Greek and Irish “emergency liquidity assistance” (ELA) operations are recorded. The latter component surged by €34.1 billion last week as Greek banks were moved temporarily off regular support (i.e. “related to monetary policy operations”) onto ELA. The fall in regular lending, however, was smaller, at €25.3 billion, suggesting that either Greek banks accessed additional ELA to cover deposit outflows or institutions in other countries – probably in the periphery – increased their regular borrowing.

The suspicion, therefore, is that system lending to the periphery is continuing to mount, with a corresponding rise in the Bundesbank’s TARGET2 exposure. Will Germany be prepared to keep the liquidity tap open right up until the 17 June Greek election, thereby risking indirectly financing the safe passage of remaining Greek deposits ahead of the possible emergence of an anti-austerity government holding strong cards against its hapless creditors?