This paper examines fiscal policy without commitment and the effects of conditional bailout loans. The government … public debt never decreases in the long-run when bailout loans are available. …

, and reduce deficits after they receive a bailout from the state government. The state government appears to be both able … and willing to enforce austerity after granting a bailout. …

. Second, it estimates the magnitude of bailout costs depending on the size of banks, their ownership type, financial soundness …, and the type of bailout instrument used by the government. The latter aims to contrast the fiscal contingent liabilities … when the government uses bailout instruments without recourse on bank future profits-such as government purchases of bad …