Eastern Europe -The Challenge Ahead

Clearly there is a tremendous need for assistance in Eastern Europe since most industries must undergo major restructuring. The new governments face many dilemmas, the first task being to establish an order of priorities to deal with the numerous problems at hand. Issues such as the standard of living take low priority compared with market economy and ecological problems. The concept of a Comecon market is now virtually non-existent and trade in roubles ceased from 1991. From this time onwards countries were obliged to trade using free market prices. Governments must also avoid the economic mistakes of countries such as Poland with its high devaluation and lack of economic control and, if possible, contain inflation and unemployment. The privatization of Eastern European enterprises raises considerable difficulties, particularly for large corporations, employing anywhere from 50-100,000 people, which played a major role in the national economy. Whichever method is selected, however, still has to overcome the problem of lack of capital and evaluating the national property. For example, earnings represent only a small percentage of the value of these national industries and thus cannot convert to private ownership without foreign capital investment, either direct or as joint venture capital.