, 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. …

(Länder) to a bail-out, the interest payments-to-revenue ratio. While risk premia measured in the German sub-national bond … receiving a bail-out payment. Quantitatively, the effects are, however, quite small. Our findings are robust to a variety of … markets’ bail-out expectations. In sum, our results indicate significant investor moral hazard in the sub-national German bond …

, we show that bailout plans with controlled interest rates can help in reducing debt-GDP ratios after some time. On the …