This chapter examines the economic situation in Southeast Europe, embedding it in the lessons of transition. The analysis is meant to highlight relevant features of transformation. The geography of transition is very diverse. One can detect clusters, groups of countries that differentiate among themselves as to economic performance and the way institutions function. In Russia and Ukraine, and in the rest of the CIS, both political and economic transition is still pretty cloudy. The chapter focuses on the exigencies of accelerating reforms and empowering citizens, together with the need for enacting public policy for the common good. The implied policy requirement is more than challenging, since it must fit into the pattern of market-based reforms, which involve income differentiation. It needs to help the transforming economies become more flexible instead of mired in social rigidities-fatal in a world increasingly subjected to the pressures of globalization.