Politics of debt explains everything if you only care about the short term business cycle.

In terms of the business cycle, the author has a point. The bond mark has been deemed "too big too fail" and so creditors will always get bailed out. This is a problem.

But austerity is primarily aimed at the long term problem of living within one's means. This is independent of the business cycle. If your debt is increasing constantly, something has got to give. Even if you do default, you still need to figure out how to balance the budget in the future.