consolidation and explains why austerity is so fiercely advocated by both core and periphery governments. The main reasons for the … governments, in cooperation with the European Commission, the ECB and the IMF, based on further austerity and wage cuts aggravate … to its disintegration. Considering the debt crisis as a problem of the PIIGS (Portugal, Ireland, Italy, Greece, Spain …

government bond spreads necessitated the implementation of austerity policies. Austerity however, may increase unemployment. If … costs of austerity. I develop a dynamic stochastic model of sovereign debt with long-term debt, endogenous haircuts and …