Stress tests like throwing water into a barrel of sawdust

‘Ireland’s banks are being bailed out to save Europe’s. Let there be no doubt about it.’

YESTERDAY’S announced recapitalisations of Bank of Ireland, AIB, Irish Life & Permanent, and EBS on foot of tests designed to diagnose the damage to their balance sheets will not reduce the uncertainty surrounding the banks’ balance sheets.

Nor will the much-vaunted bank restructuring, which amounts in balance sheet terms to little more than selling off the good stuff at knock-down prices and pooling the bad stuff in one place in the hope the rest will seem more cleansed.