IDEAS home Printed from
   My bibliography  Save this paper

Sovereign Debt Sustainability in Italy and Spain: A Probabilistic Approach


  • William R. Cline

    () (Peterson Institute for International Economics)


This paper introduces a new probabilistic approach to sovereign debt projections and presents new estimates of debt ratios through 2020 for Italy and Spain. The new approach takes account of likely correlations across 243 alternative scenarios with three states (good, baseline, bad) for five key variables (growth, interest rate, primary surplus, bank recapitalization, and privatization). The 25th and 75th percentile scenarios are reported, as are the baseline and probability-weighted outcomes. The results suggest sovereign debt is sustainable in both Italy (where debt ratios are likely to decline because of a high primary surplus) and Spain (where the ratios rise but at a decelerating pace and from relatively low levels).

Suggested Citation

  • William R. Cline, 2012. "Sovereign Debt Sustainability in Italy and Spain: A Probabilistic Approach," Working Paper Series WP12-12, Peterson Institute for International Economics.
  • Handle: RePEc:iie:wpaper:wp12-12

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. William R. Cline, 2011. "Sustainability of Greek Public Debt," Policy Briefs PB11-15, Peterson Institute for International Economics.
    2. William R. Cline & Guntram B. Wolff, 2012. "Resolving the European Debt Crisis," Peterson Institute Press: All Books, Peterson Institute for International Economics, number sr21.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. William R. Cline, 2013. "Debt Restructuring and Economic Prospects in Greece," Policy Briefs PB13-3, Peterson Institute for International Economics.
    2. William R. Cline, 2014. "Sustainability of Public Debt in the United States and Japan," Working Paper Series WP14-9, Peterson Institute for International Economics.
    3. Tielens, J. & van Aarle, B. & Van Hove, J., 2014. "Effects of Eurobonds: A stochastic sovereign debt sustainability analysis for Portugal, Ireland and Greece," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 156-173.
    4. William R. Cline, 2015. "From Populist Destabilization to Reform and Possible Debt Relief in Greece," Policy Briefs PB15-12, Peterson Institute for International Economics.

    More about this item


    sovereign debt; Italy; Spain; euro area crisis;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iie:wpaper:wp12-12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peterson Institute webmaster). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.