(Reuters) Europe's banks face a moment of truth next year when health checks will spell out the repairs they need.
The trouble is that fixing them could require cash-strapped governments to borrow more, often from the very banks that need their help.
The European Union's efforts to break this "doom loop", in which frail banks and penurious states recycle the same money to prop each other up, are falling short.
Banks have ramped up buying in the past two years and enjoyed high payouts on government bonds bought with cheap European Central Bank loans. On the other side of the coin, states such as Italy and Spain increasingly lean on their banks by selling them debt.
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