Ireland will publish what is meant to be the final bill for propping up its banks on Thursday, in a last-ditch bid to convince investors it can avoid a damaging restructuring that would deepen Europe's debt woes.

Ireland's new government has pledged to outline a "credible" plan for sorting out its financial system on the back of fresh stress tests but its plausibility will rest on any concessions Dublin can win from its paymasters in Brussels and Washington.

A bailout from the European Union and the International Monetary Fund late last year failed to resolve the financial crisis and Dublin's dismal record in calling the end of its banking woes, now in their third year, mean scepticism is high.

"We have been at moments like this so many times in the past where we thought that this will be the decisive element," said Austin Hughes, chief economist at KBC Bank.

"Once more we cross our fingers and hope that this will be the defining moment and we will able to begin to look beyond the current difficulties.

"The crucial element is that we get a coherent response on this from goverment and Europe."

Dublin is relying on the European Central Bank (ECB) to give medium-term funding to its banks to help cap the cost of recapitalising them below the 35 billion euros set aside for the lenders in an 85 billion-euro bailout package.

An announcement on such a facility, revealed to Reuters by a euro zone central banking source last week, may come after the results of the stress tests are published at 1530 GMT in Dublin.

Even with a credible banking bill and funding from the ECB, Ireland's Prime Minister Enda Kenny still needs to persuade European partners to cut the cost of their loans to the euro zone struggler and possibly extend the loans' duration to convince investors Ireland can tackle its debt mountain.

Local media have said Bank of Ireland (BKIR.I), Allied Irish Banks (ALBK.I), Irish Life & Permanent (IPM.I) and EBS Building Society [EBSBS.UL] will need between 18 billion and 23 billion euros in additional capital after the tests.

Six analysts surveyed by Reuters have put a figure of 23 billion euros on the bill.

Here's an analyst's research note to put the cat among the pigeons on the subject of banks that are "too big to fail". Rather than Barclays being too big, argues John-Paul Crutchley of UBS, it may be that Britain is too small.

You can see his logic. Barclays looks and feels like JP Morgan, the big US bank. Both are international operators with a broadly comparable mix of retail, commercial and investment banking activities. What's more, Barclays appears better capitalised on a like-for-like basis.

But JP Morgan has been given freedom by the US authorities to increase dividends and buy back shares. Barclays, on the other hand, "remains mired in the fog of regulatory uncertainty", as Crutchley puts it. Dividends are constrained and UK regulators appear determined to impose higher capital thresholds than their US counterparts.

The explanation, suggests the analyst, is the relative size of the banks in the context of their host countries. Barclays' gross balance sheet is 100% of UK GDP; JP Morgan's larger balance sheet is 24% of US GDP.

This is a neat way of expressing the difficulty facing the independent banking commission and George Osborne. If, in the interests of protecting taxpayers, they oblige UK banks to carry more capital than US banks, do they put UK banks at a disadvantage? Or, more precisely, do they put shareholders in UK banks such as Barclays at a disadvantage? We know Barclays has no intention of paying its staff a lot less; it continues to spout the familiar line about the need to remain competitive. Instead, the cost of extra capital would fall on shareholders, in the form of lower dividends.

In time, thinks Crutchley, Barclays may have "little option but to consider shifting domicile" to serve the interests of its owners. Some form of "corporate activity", meaning an acquisition or merger, would be one method.

Crutchley has summed up the policy dilemma well. The banks, no doubt, will claim his analysis shows their threats to move abroad are credible. Even Stephen Hester of RBS (which, being 83% owned by the UK taxpayer, is in no position to make threats) has reminded his investors of the "downside" risk to shareholders from regulators.

But that is not a reason to surrender to banks' threats and tantrums. The primary job of the government in this context is to ensure the solvency of the country is not jeopardised by having a dangerous banking system. If shareholders in UK banks lose a little as a result, that's unfortunate but may be just a fact of life. Attempting to compete with the US by copying its lax standards sounds like a disaster in the making.

International Financial Reporting Standards (IFRS), which have been described as "fatally flawed", let RBS report a core tier one ratio for 2010 more than 4pc higher than it would have been under the UK's old accounting rules that were replaced in 2005.
The analysis comes ahead of the publication of a House of Lords Economic Affairs Committee report into UK accounting practices expected to be highly critical of the IFRS system.
According to RBS's latest accounts, which were calculated using IFRS, the bank has tangible shareholder assets of £58bn and core tier one capital of 10.7pc.
Tim Bush, a City veteran and member of the "Urgent Issues Task Force" that scrutinizes the work of the Accounting Standards Board, has calculated that under pre-2005 UK GAAP (Generally Accepted Accounting Principles) rules, which governed accounting in Britain for over 100 years, RBS would have a tangible shareholder assets of £33bn and a core tier one capital of just 6pc.
The criticism is of the IFRS framework. There is no suggestion RBS or any other British bank has broken the accounting rules.