chapter  3
20 Pages

The Economic Crisis in Eastern Europe

WithLincoln Gordon

The Eastern economies have been confronted with three interrelated sets of fundamental policy issues: internal systemic reform; the structure of their external economic relationships with both East and West; and the management of their hard currency indebtedness. Only the third of these fits the definition of “crisis.” Except in Czechoslovakia and Bulgaria, Eastern Europe confronted a severe balance-of-payments crisis in the early 1980s, when inability to maintain current interest and amortization payments on Western bank and governmental credits threatened a cut-off of commercial financing for essential imports. Eastern European economies are too small and too lacking in natural resources to be self-sufficient, either individually or as a group, although the largest, Poland, is less externally dependent than the others. In the Stalinist phase, the economic planners pushed as far as possible toward autarky, but from the mid-1950s on, external trade developed rapidly.