The collapse of Communism in Central and Eastern Europe marks a watershed in the region’s economic history. Most observers on both sides of the cold war divide initially greeted the events of 1989 with considerable euphoria. They conjured up visions of a brighter future in which the region’s economies would throw off the shackles of their central planning systems, integrate fully with the rest of Europe, and begin catching up with their wealthier neighbors in the West. Euphoria has given way to more sober reflections in face of post-1989 realities. In Western Europe the push for further unity within the European Community (EC) ran out of steam in 1992 and is now in danger of collapsing under the weight of popular fears about its consequences. In Eastern Europe social conflict, economic stagnation, and challenges to democratic values threaten to derail the transition from Communism. The vision of European-wide integration is giving way to neocold war images of a “fortress EC” sealing itself off from its poorer, more unstable neighbors in the East.