European banks - a quarter insolvent?
The good news I read in the post about reasonable stress tests on European banks is that they tend to hold their own debt, so most of the pain from fixing this stupidity will be felt where it was created.
Banks tend to hold a very disproportionate amount of their sovereign bonds from their home country. Thus, banks from Greece, Hungary, Ireland, Italy, Poland, Portugal, Romania, and Spain encounter a disproportionate amount of the damage in this scenario.
The linked article talks about how the original stress tests assumed no sovereign defaults.