ABSTRACT
The countries of Central and Eastern Europe gave up central planning and switched over to a market economy approach. They had to rebuild their economic systems and adapt their economies to the new conditions. Together with the new economic concept, the political decision structures and the institutional set-up changed. A lot of economic problems such as privatization, tightening budget constraints and inflation had to be solved. Transformation countries are often characterized by high budget deficits. The opening up to foreign trade involves efficiency gains from international exchange. The domestic enterprises are exposed to international competition. The opening up to foreign trade improves the prospects for attracting foreign capital that can give significant new growth momentum. In Poland, the nominal exchange rate was further adjusted even after the initial devaluation. The transformation crisis becomes particularly apparent in most of the successor states of the Soviet Union.
