Problems of the External Sector During the Transition Period in Eastern Europe

The first part of this article deals with some basic questions concerning the transition from a planned to a market economy in the C. S. F. R., Hungary, and Poland. Forty years of a centrally planned system have shaped the attitudes of economic agents, and the capacity of enterprises as well as of administration officials to act in conformity with market rules has been greatly impaired. Thus, the experiences of Western Europe in the post-war period can be transferred to Eastern Europe only to a limited extent. If the external sector of the Eastern economies is to flourish, convertibility of the currencies must be implemented quickly; this in turn will require a massive devaluation, supported by supplementary commercial policy measures. Even though the foreign trade of the Eastern economies should be redirected toward the West, trade relations with other Eastern countries should not be neglected; in the transition phase these traditional trade relations need to be stimulated through counter trade, bilateral clearing (in trade with the U. S. S. R.), but not through a payments union.