Sustainability Of France, Italy's Finance European Debt Crisis

In2009, affected by the financial crisis, European countries have adopted an active fiscal policy to stimulate economic recovery, making the financial burden of European countries heavily, some countries sovereign debt payments happened crises. The crisis quickly spread from Greece to Spain, Ireland, Portugal a. In the second half of2012, due to the economic downturn in Europe, the economic recovery is less than expected, making investors lose confidence in the sovereign debt crisis, there are further expanding trend. The2013presidential election in France and Italy also makes people more worried about the governance of the European debt crisis, the French presidential election has ended, Hollande advocated using the proactive fiscal policy to make economic recovery. The Italian general election continues, the current Prime Minister Monti advocated the continued tightening measures to restore market confidence, to another candidate Berlusconi believes that the need to give up the tight fiscal policy, and to take a proactive fiscal policy to stimulate the economy. Expressed doubts about the outside world for the two major economies ability to achieve its budget commitments, resulting in the global stock market turmoil, the yields of the two countries began to rebound upward trend.This paper analyzes the debt indicators, and the impact of the financial sustainability of the two countries. Using Intertemporal budget constraint model, cointegration test method to analyze the two countries’ financial sustainability from1980to2011, and reject the two countries’ possibility of financial collapse. Then, the evaluation of the current fiscal austerity between the two countries and think that its policy force too much, has affected the economic recovery, detrimental to the long-term fiscal sustainability. Finally, I put forward recommendations to enhance the financial sustainability of the two countries, and that the two countries need to carry out the reform of the economic structure, improve their competitiveness, and also the need to reform the social security system, the activation of the labor market.