The ECB is no longer accepting Greek sovereign debt as collateral, and the Greek government is insolvent. Greece cannot be allowed to default, so it needs a plan. The plan is a scam. The Greek government sells T-Bills to its own banks. These banks present the paper to the Bank of Greece, which sends them to the ECB for cash. Then the Bank of Greece deposits the newly created cash back into the Greek banks “increasing” their capital. The best part of this “plan” is that the money is being used to pay back a €3.2bn bond held by the ECB!
To summarize, the ECB is loaning Greece more money to pay the ECB!
The net effect of this is increased Greek indebtedness and more bad paper in the failing Greek banks. The bottom line is that this scam is keeping Greece afloat in the meantime but will surely push Greece into default as it increases Greece indebtedness. More debt means more debt service, and Greece cannot even service its debt after two bailouts with writedowns.