On the Timing of Default Losses: When and Why?

After the gensys procedure on Matlab, now we can make some comments about our model; we're now able to describe households' and government's behaviour when default happens and when not.

In our steady state we're expecting that the government will mantain the same level of public expenditure, just smoothing it between periods. While in a default scenario all levels of public expenditure and bonds will decrease since the government won't be able to repay a fraction of its old debt.
For what concerns the fraction of the old bond that the government is no more able to repay, for z=1 we can see what happens using s=0.05 or 0.1, thinking that it's a huge loss if a government is not able to repay 10% of its old debt.

As anticipated this losses becomes really big if there are no government interventions, since the economy needs more money in its attempt to mantain high levels of cosumption in all the economic activities.
A regime in which a country continue to borrow more and more in order to repay debts is no longer sustainable.
Our point is that Europe needs reforms. Europe needs also for a ght against tax evasion that reaches higher percentages in countries as the Est-Europeans, Greece, Italy but it's still present in Germany and France as well.

Some reforms have to be made by european authorities while other has to be made within each country, with the help of each government. If a state experience a default it will take time to recover all the losses.