“We should resign ourselves to the fact that the ‘new normality’ is characterised by volatility and uncertainty.” So says the CEO of Deutsche Bank.One element of that volatility and uncertainty — the possibility of heavy losses for holders of sovereign bonds issued by cash-strapped European countries — could lead to the collapse of a number of financial institutions, according to the leader of what is (for those keeping score) Germany’s largest bank.Christina Lagarde was pilloried for making a similar assertion last month. Irresponsible, uninformed, incompetent, sputtered European political leaders as the IMF head let the cat out of the bag.Denial has been Europe’s core strategy for dealing with the fact that its banks (encouraged by dumb regulators who counted sovereign debt as safer than other assets) own huge tranches of bad sovereign bonds. If we all clap our hands and say we believe in fairies, Tinkerbell will live.Fat chance. Bogus “stress tests” giving a “clean bill of health” to bad banks fool no one — and only increase market uncertainty by making the system’s regulators and guarantors look like dishonest and incompetent fools.Now that the head of Europe’s biggest bank has said that he for one does not believe in fairies and is tired of clapping his hands, it is just barely possible that European political leaders will shift toward a fact-based financial policy.Reality isn’t always pretty. It is understandable that so many of Europe’s leaders wish this issue would just go away. But it won’t, and at this point procrastination only makes things worse.