The European debt crisis presents a challenge to our understanding of the relationship between government bond yields and economic fundamentals. I argue that information frictions are an important missing element, and support that claim with empirical evidence on the evolution of GDP forecast errors in years 2008-2014. I build a quantitative model of sovereign default where output features rare disaster risk and agents learn about its realizations. Debt crises coincide with economic depressions and develop gradually, while markets update their expectations about future income. Calibrated to Portuguese economy, the model replicates the comovement of bond spreads and output before and after 2008.