Is there an inevitable dynamics that leads to either a public debt crisis or a highly restrictive fiscal policy?
The dynamics would be as follows: Initially, the risk of default on the public debt is low. This leads to low default risk premia, which encourages the government to conduct an expansionary fiscal policy as it pays low interest rates, which keep it fiscally solvent; The increase in the public debt then gives rise to a default risk, interest rates rise and the public debt ratio has to be stabilised or reduced to prevent a debt crisis caused by a very rapid rise in the public debt ratio . We examine: Whether this dynamics has appeared in the past; Whether central banks are able to prevent this dynamics from appearing.