On November 12, 2026, Mislav Brkić (Croatian National Bank) gave a virtual presentation based on the article published in Public Sector Economics in which he analyses fiscal developments in the EU after the pandemic. 

Following the outbreak of the COVID-19 pandemic, the EU economy experienced several years of sharp swings in economic growth and inflation rates, which were mirrored in equally strong movements in government debt ratios. The debt ratios soared during the worst phase of the pandemic crisis, but fell rapidly afterwards when the economy reopened and growth recovered.
The paper aims to identify the key factors that enabled EU member states to rapidly reduce their elevated government debt ratios in the period 2021-2023. Specifically, by applying a decomposition of annual changes in debt-to-GDP ratios, it determines whether the fast reduction in member states' debt ratios after the pandemic was driven mainly by their prudent fiscal policies, or by a favourable snowball effect – the positive difference between nominal GDP growth rates and interest rates on debt. 

The analysis shows that the snowball effect played a key role. The robust, post-pandemic economic recovery coupled with high inflation produced unusually high nominal GDP growth rates. Meanwhile, effective interest rates on debt rose much more slowly due to relatively stable long-term inflation expectations and a favourable maturity composition of member states' debt. This, together, resulted in a large positive growth-interest differential, which gave rise to a strong and favourable snowball effect. 

Primary fiscal balances, on the other hand, played a less important role in reducing debt, as most member states ran primary fiscal deficits in the post-pandemic period. Nevertheless, by behaving countercyclically in times of adverse shocks, fiscal policy indirectly contributed to the positive growth-interest differential that brought down the debt ratios. 

The lecture was moderated by Luka Draganić, a researcher at the Institute of Public Finance. Presentation and a recording of this interesting lecture are also available.