Significant chance that ECB will withdraw/refuse to increase Greece commercial bank funding: Capital Economics

Quotes from Capital Economics:

- ECB minutes on Thur confirmed that support for the new QE programme was not unanimous, suggesting that its scale will remain limited. They also highlight discomfort with any policy that might appear to be bailing out indebted governments or that would put the ECB's balance sheet at greater risk. 

- Meanwhile, by upping its limit for emergency liquidity assistance to Greek banks by just €3.3bn on Wed, the ECB did the bare minimum. But as they were already borrowing about €60bn from the central bank when data were last published back in Dec and reportedly lost €1bn in deposits last Thur and Fri alone, it is not clear that this will be enough. 

- The decision to increase the limit at all probably owed much to the Greek Government's concession earlier on Wed that it would request some form of bailout extension. The Bank's stance will clearly keep the pressure on Greece and the Eurogroup to reach a deal very quickly. But we are sceptical that there is enough common ground for this to be achieved. 

- Accordingly, there is a significant chance that the ECB will withdraw or refuse to increase commercial bank funding over the next week or so, forcing Greece to implement capital controls and perhaps abandon the euro.