Can Eastern Europe Ever Catch Up?


The latest assessment of the economies of Eastern Europe from the European Bank for Reconstruction and Development (EBRD) is not very encouraging. The report flatly states that nations in Eastern Europe, on the whole, will remain far behind their western counterparts for a very long time unless there is a strong re-commitment to the reforms undertaken in the years right after these states made the break from Soviet influence.

The EBRD acknowledges that a big part of the stagnation problem today is that cheap credit emanating from the western states has dried up. The report also places considerable blame on the policy retreats that have taken place all over the region. The assertion is that economic and financial issues caused the governments to fall back into old patterns. That meant slowing down privatization in an attempt to preserve jobs, restricting the actions of local banks and backing the kind of white elephant projects that were the hallmark of the old days.

The nations of the eastern half of Europe are only barely connected to the rest of the continent. The trade between them has slowed, and there has been no replacement for that western connection. Some have tried to reassert their connections to Russia, which is becoming less and less of a wealthy nation these days, itself. Most have done very little to engage in trade with Asia or Latin America. Even the United States has been mostly untouched as a trade partner.

- Chris Kuehl, PhD, Armada Corporate Intelligence

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