How can a self-fulfilling public debt crisis be avoided?

A self-fulfilling public debt crisis is a crisis where the mere expectation of a crisis (a debt default) leads to an increase in interest rates (due to the rise in the default risk premium) that actually brings about the crisis. The change in expectations, without any change in fundamentals, makes the equilibrium without a sovereign debt crisis “jump” to a n equilibrium with a crisis . For a self-fulfilling sovereign debt crisis to not be able to happen, the equilibria where there is a default (crisis) must not be able to materialise , and the only equilibrium must be the equilibrium without a default (without a crisis). This requires: A low public debt ratio; A high primary fiscal surplus; High nominal growth on average; A low risk-free interest rate; Low variability in nominal growth. We illustrate these conditions with the cases of Italy, Spain and France. It seems that only Spain would be able to escape a self-fulfilling public debt crisis.