Introduction

The ten accession countries that entered the European Union in 2004 represent the greatest challenge yet for the development of the EU's political and economic institutions. Their economic diversity is obvious from the “basic facts” presented in table 19.1. The accession countries' range of sizes alone makes it difficult for the European Union to have a uniform policy toward each. The difficulty of formulating policy toward them is compounded by the dispersion of their per capita incomes as well. To elicit economic policy lessons from their experiences to date, we must divide them up according to their economic history and their geographic location. Accordingly, we analyze the five central and eastern European countries (CEE-5) as a group: the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia.

These five are also the first countries to make the transition from failed centrally planned economies under Soviet (or Yugoslav, in the case of Slovenia) domination to a reasonably successful form of market capitalism very much modeled on the continental European members of the European Union. By most economic criteria, as well as most political criteria, all five countries have completed their transition. Most economic activity is now in the private sector; most prices have been liberalized so that markets can allocate resources according to consumer demand; governments restrict themselves to the regulation of market activity under a consistent rule of law; and subsequent elections have replaced governments several times without resort to military coups or violent revolution.