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CEE sovereign debt dynamics becoming more fragile

Governments across Central and Eastern Europe (CEE) need to deliver significant fiscal tightening over the coming years to prevent public debt ratios from grinding higher. The risk of an imminent fiscal crisis across the region looks low relative to many other parts of the EM world, but Romania and Hungary stand out as two countries where the size of the necessary fiscal adjustment to stabilise the debt ratio is particularly large. Any fiscal slippage could push up risk premia on sovereign debt in the coming years.

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