Deregulation and macroeconomic stabilization

The countries of Central and Eastern Europe began in the 1990s to transform economically as well, based on – and in parallel with – their political transformation from one-party, non-parliamentary regimes to multiparty, parliamentary democracies. The former state socialist countries hurried to eliminate the failed economic system based on state ownership, planning, strict central regulations, and in most cases collectivized agriculture. Changes were patterned on the Washington consensus guidelines, and the newly elected governments rushed to build a capitalist market system overnight. Other concepts and recommendations for transformation were not seriously considered and were almost universally rejected. The new elite believed that speedily copying the West would open the door to joining Europe almost immediately.

The Poles thought that the West bore a “moral responsibility” to reward them for their role in eliminating the Soviet danger. The Czechs believed they genuinely belonged to the West, and Václav Klaus often pointed to the map, noting that, geographically, Prague is more Western than Vienna. The Baltic peoples rediscovered their Nordic–Scandinavian connections. The Yugoslavs were convinced that their international recognition and historical advantage in reform would pave the way for an easy transformation.

Socialist economic planning, state control, and regulations were rapidly abolished. New laws brought about deregulation. The constitutions were either amended or new ones enacted by the new, freely elected parliaments. Private ownership was reestablished, and the road was opened for private business. State interference was significantly decreased.