Policy Paper: Eastern and Central Europe - Second Wave of Reform and Success

This Policy Paper, written by Nima Sanandaji, argues that the crisis will by no means erase the prosperity gained, and they are set for a rapid return after the crisis. Also, these countries continue reforming in the midst of the crisis.

When the Berlin wall came down 20 years ago, many observers feared deep economic crisis for a very long time in Eastern and Central Europe. The countries that left communism and the centrally planned economy were generally advised to reform slowly.

Instead, many of the newly liberated countries reformed radically, and introduced market economic institutions swiftly. After a few years of economic downturn, growth reached high levels and remained on average twice as high as in Western Europe for 15 years.

During the economic and financial crisis, however, the critics have emerged again, claiming that the free-market reforms made these countries vulnerable. This report defends these reforms and predicts a rapid recovery after the crisis.