It depends. In this paper we investigate how the sovereign default premium responds to a fiscal shock—specifically to an unanticipated and exogenous reduction of government consumption growth. For this purpose we build a new data set for 38 emerging and developed economies. It contains time-series observations for the sovereign default premium and for fiscal shocks, constructed on the basis of a variety of sources and approaches. The extent of fiscal stress in each of our approximately 3000 country-time observations is quantified on the basis of the cumulative distribution function of the default premium in our panel. We then estimate how fiscal shocks impact the default premium using local projections. Conditioning on initial conditions in terms of fiscal stress turns out to be crucial: a reduction of government consumption growth increases the default premium if fiscal stress is severe, but decreases it if times are more benign.