LONDON — It is billed as a moment of truth — but some fear an exercise in obfuscation. The results of European Union stress tests designed to uncover the depth of rot in the continent’s banking system come out this week — and an accurate reading would go far to answer the key question of whether Europe’s debt crisis is finally over.
Some experts expect gloom whatever the result: Bad news could send markets into a tailspin again. Too rosy a picture, on the other hand, may suggest to investors that the tests have not been rigorous enough.
Europe’s debt crisis has already forced Greece to take a 110 billion euro international bailout to avoid bankruptcy and pushed governments to put up a $1 trillion backstop for troubled governments if they need it. Greece’s near- failure sent shivers of fear through investors wondering which banks’ balance sheets were hiding Greek and other debt that could go bad.
Most of the 91 banks tested are expected to pass, but analysts say some must fail for the tests to have any credibility. And failure won’t necessarily mean the banks are bust but that they will need to raise money from investors or governments.
