A debtor is better off if the cost of his debt matches the ups and downs of his economic fortunes: no doubt about it. While it is possible to bear a higher cost of debt in good times when income rises, it definitively helps if the cost falls in downturns. This is true for households, firms and the government. In finance theory, this concept goes under the name of “state-contingent debt”, which in a broad sense can be understood as a contract which foresees a revision in the timing or amount (possibly both) of the payments due by the debtor when pre-defined external circumstances apply. This is the gist of the proposal put forward by a number of scholars and institutions arguing in favor of the issuance by governments of GDP-indexed bonds (“the GDP-Is”), that is securities whose cash outflows by the Treasury on account of the coupon and/or principal vary with the own GDP dynamics. It is straightforward to understand that such a class of bonds has the potential to cut the cost of servicing the public debt exactly at the point in time when it could be more acutely needed: namely by freeing space in the budget when an unforeseen recession calls for a supportive fiscal policy.[…]