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The PyExc_MemoryErrorInst object is persistent and its members never get
cleared. This means any local variable which gets caught in the
traceback isn't deallocated until the next MemoryError (!). Sample
script demonstrates this.
(this doesn't seem to affect 2.x because the traceback isn't attached to
the exception instance)

The following patch fixes the case when the exception is discarded in
Python, but not when e.g. PyErr_Clear() is used from C code.

A proper fix would probably be to maintain a bunch of preallocated
instances in a freelist rather than relying on an explicit singleton. It
would enforce proper dereferencing and garbage collection semantics.

Honestly, I don't think it is a big issue. MemoryErrors are rare and
typically cause the interpreter to shutdown.
By the way, do you think the static PyExc_RecursionErrorInst object is
affected by this bug?

Here is a patch preallocating a freelist of MemoryErrors.
To Alexandre: yes, PyExc_RecursionErrorInst probably has the same problem.

Would someone please check out thie patch, it's mostly changes to C code that I'm not qualified to comment on.

Changing priority as nobody appears to have lost any sleep over this issue.

Updated patch against py3k.

I can't manage to reproduce the issue with PyExc_RecursionErrorInst. It seems this instance is only used in a very select condition, that is, when the recursion limit is hit when trying to "normalize" an exception. Therefore, I will add a test without "fixing" anything.

Patch with improved tests committed in r85896 (3.2) and r85898 (3.1).