The aim of this study is to investigate debt sustainability in ten Central and

Eastern European countries over 1997-2013. Following Burger (2012), we

calculate the stabilized debt using the estimates of a fiscal reaction function for

a balanced panel with fixed effects. Comparing the stabilized, the effective debt

ratios and the historical averages, we can assess debt sustainability in short

and in long run. We find that current debt ratio as of 2015 for Bulgaria and

Romania is not sustainable. The debt dynamics of Bulgaria is stable whilst for

Romania’s case the debt trajectory indicates unstable dynamics. As for

historical averages of debt ratios, Bulgaria could encounter debt sustainability

issues also in the long run.