Stress tests add to stress

It’s worth looking at this Bloomberg News interview with Brian Cowen.  Although Bloomberg was in some ways going along with the hype surrounding Cowen’s visit — “Ireland primes the pump” — the charts flashed during the interview told their own story.  More importantly, the interviewer extracted an acknowledgement from Cowen that AIB will almost certainly need more state equity to be recapitalized: “the other one [AIB] may require some help and we will provide that”.  AIB’s current market value is less than 1 billion euro, a bit of context for whatever multi-billion euro sum is sprung on us between now and the end of the year.   Of course the new EU stress tests, coming later this month, could upset even that calculation.  At least, from the government’s perspective, it’s 12 weeks before the Dail gets to discuss any of this.