ABSTRACT
The revolutions in Eastern Europe and the Soviet Union in 1989–1991 initiated a dramatic reorientation of the region’s economic, political, and security relations with the rest of the world. Most policymakers in the region are opting for policies and institutions that will normalize diplomatic relations with Western countries and facilitate integration into the world economy. In the economic sphere, the new approach consists essentially of a transition from central planning to more market-oriented economies.
An integral part of such a transition is a repudiation of policies and institutions that discouraged trade with the West and limited the role of foreign capital in these economies. As a result, the reforming countries are developing more extensive trade ties with the rest of the world, especially with Western Europe, and making major demands on foreign capital markets to help rebuild and modernize their economies. The response of Western governments and the multilateral economic institutions will heavily influence the ability of the reformers to integrate their economies into the world economy.
Of utmost importance to the countries of the region is the response of the European Community. The countries of Eastern Europe and some of the former Soviet republics appear inexorably drawn to Western Europe, particularly the European Community. Common history and culture, geographical proximity, and economic 380complementarity lead many policymakers in the region to consider themselves natural candidates for integration into a united Europe. Many see membership in, or close association with, the EC as a means of solidifying and formalizing the break with their recent past. The governments of the smaller states see EC membership as an important safeguard against the kind of external domination that they have experienced since World War II. Reformers in the region believe that the prospect of eventual membership in the EC will buttress the democratic and market reforms that they have undertaken.
While full membership appears to be years away, the first steps of integrating the region into a European trade bloc are already underway. The association agreements and other agreements that the EC is concluding with countries in the region are providing a basis for expanded trade and economic cooperation. Moreover, capital flows, in the form of private investment and official aid, are likely to tie Western and Eastern Europe closer together.
