ABSTRACT
Heavy reliance on hard currency imports and short-term payment obligations have resulted in a situation in which Hungary has avoided rescheduling only by a hair’s breadth. Hungary urgently needs to expand its private sector in order to increase competition on the domestic market and to enlarge the number of agents who are truly profit-oriented. Since the private sector comprises only 15 to 20 percent of the economy, such an increase can be achieved only through massive privatization of state property. The reforms of 1968 and later aimed at introducing market elements into the economic system. In contrast, the present reforms aim at replacing the central allocation of resources by market allocation; at creating equal legal conditions for the private and the foreign sector and at increasing their weight in the economy; and at creating a democratic political system. The transition policy can be expected to increase social tensions, mainly as a consequence of rising unemployment and income differences.
