To recap Giavazzi and Pagano's main claims, the Swedish government ran up public debt to 67.8 percent of GDP during a massive recession, but most of it was its own choice. This was enough to create a bond spread of 1 percent (100 basis points = 1 percent = nothing to get worried about) over an equivalent World Bank note issue. This supposedly upset Swedish consumers (who apparently spend their time watching bond spreads) so much that despite being in the middle of a recession, rational expectations and Ricardian equivalence kicked in through the expectations channel to make sure that when free money from the state arrived in the form of a tax cut, it had no effect on consumption. Consumers rationally discounted the stimulus as a sign of terrible times ahead and offset the expansion via their longsighted expectations.

Mark Blyth, Austerity, loc. 572