We review recent literature on fiscal sustainability with particular reference to problems specific to transition countries. While the original literature on fiscal sustainability chiefly focused on industrial countries there are by now few works that have focused on fiscal sustainability in transition countries. The paper’s purpose is to assess the short-, medium- and long-term sustainability of fiscal policy on the national and on the local level in the great majority of transition countries divided into three main groups: Central and Eastern Europe (CEE), Southern and Eastern Europe (SEE) and the Commonwealth of Independent States (CIS). By using mainstream (primary fiscal gap) theory (Buiter 1983 and Blanchard 1990), the analysis ensures some degree of restrictiveness. Indeed, given the looseness of the theoretical criteria for solvency, a non-increasing public debt to GDP ratio is seen as a practical sufficient condition for the sustainability of fiscal policy. In this respect the primary fiscal gap, defined as the difference between the required primary fiscal balance to GDP ratio and the actual primary fiscal balance to GDP ratio, is calculated for selected transition countries. Based on simple mainstream theory measures of fiscal sustainability, the results indicate that fiscal sustainability seems to be a problem in many transition countries, particularly in CEE (e.g. Czech Republic, Hungary, Poland) and the SEE region (e.g. Albania, Croatia). Moreover, when analyzing local government fiscal positions in CEE region, the situation is much better, with (medium-term) unsustainable position only found in Hungary and Slovenia. However, since we are dealing with an ex ante analysis on the grounds of ex post algebra of sustainability some caution should be exercised. In particular, we should expose the problem of the steady-state assumption as well as the presence of uncertainty and endogeneity of the variables included in the analysis.