Soviet Union. With the aim of realizing this wide- ranging economic cooperation, the conference has considered it necessary to set up a Council for Mutual Economic Assistance...
The CMEA will only take decisions when the interested declare countries themselves in agreement."
It was with these words that, on January 25, 1949,
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17 May 27, 1991 • #207 International Viewpoint
COMECON 52 billion forints in 1989 to 1.4 billion in 1990 and in 1990 there was a hard currency trade surplus of $950m.
Hungary's foreign trade is in surplus by
La result of the re-orientation towards Western markets. Until 1987 the volume of trade with other Comecon countries was twice that with the West; today the position has been reversed. But the collapse of trade with the East could aggravate the crisis. The value of exports to the East — as calculated in rubles (for the last time) in 1990 — dropped by 24% on the year. As a consequence production in the big machine and vehicle firms specializing in the ruble export market was
This translated into only a 5% drop in Gross National Product, since the dynamic sector of small and medium size firms was hardly affected and because of the drop in the share of Eastern countries in Hungary's trade in the mid-80s to 33% in 1990.
In 1991 the share of Eastern trade will continue to decline since here market economic methods cannot be applied to the problem. These problems will be made worse, not only by the breakdown of the Soviet economy, but also because it has not so far been possible to make agreements with the Soviet republics and entercentralization in the Soviet Union is going to get stronger.
A striking example of the difficulties is the fact that it has been possible to hold back the export of Hungarian medicines, buses and other goods, designated for the Soviet Union and urgently needed there. In spite of repeated discussions, it has not been possible to arrange credit for these.
While Hungarian and Soviet firms have agreed on Hungarian deliveries worth $500m for this year and there has been talk of opening lines of credit worth $150m, in fact it has just been announced that only $20m of credit is currently in
Here too the main burden of the economic reforms is borne by the workers. Over the past year unemployment has risen by three and a half times to 90,000 (or 2% of the economically active population). Prices of consumer goods rose, according to official figures, by 29% over the year, and this year are expected to rise by a further 35 to 37%. Wages have fallen In CZECHOSLOVAKIA privatization got under way on December 1, 1990. In the meantime, the "small privatization" has been carried through. Over 100,000 enterprises were put up for auction. Thus far only small enterprises have passed into private hands — mostly, through the use of intermediaries, foreign hands. The "large privatization" is yet to come.
Czechoslovakia, which has the reputa18 tion in the West of being a relatively successful industrial country, is now overInternational Viewpoint #207 • May 27, 1991 burdened with industrial disadvantages — unemployment and inflation. The freeing of prices, on January 1 this year, raised the cost of living by more than 44% and the cost of food went up by more than
However, "reform ready" Czechoslovakia is going out to embrace the Western money bearers. The EEC has promised $1bn in credit in the framework of the G24 aid programme. It is small wonder therefore that Havel has turned his back on any successor organization to ComecTHE SOVIET UNION The great unknown is the economic and political future of the USSR. The hub of the former Comecon now finds itself in an unprecedented economic depression. A 2000 page joint report from the IMF, the World Bank, the OECD and the East European Bank paints a hair-raising picture of the Soviet economy. The logical conclusion is drawn: financial help would be money down the drain. The way out from the catastrophe is to be shock therapy on Polish lines.
1990 saw the Soviet economy in decline in all departments. GNP fell by 2% (1989 +3%), labour productivity was down by 3% (1989 +2.5%) and the volume of foreign trade fell by 6.9%.
With the termination of foreign trade between Comecon countries in transferable rubles in favour of hard currency at the end of 1990, the Soviet economy should get a boost. So at least speculated the Basel Bank for International Financial Settlements (BIZ) in their first quarterly report for this year, where they see the USSR as the main beneficiary of the changed trade system in central and east-
A doubling of interest payments and a sharp increase of Soviet imports as a result of the growing difficulties of the domestic economy, however, meant that the balance of payments were only at break even point. Extraction problems in the oil industry meant that oil exports declined, and hoped for extra income was lost. It remains the case that the USSR, because of its vast supplies of raw materials, has an advantage in hard currency trade lost to the other ex-Comecon states.
But this has turned out to be of marginal importance; on the one hand, owing to structural problems (transport, previous commitments and so on), and on the other because of the difficulties that the other Eastern European countries have in paying for Soviet imports in hard currency. Around 60% of Soviet hard currency income comes from oil sales to the West. Furthermore the low oil price means that the cards are once more stacked in favour of the industrialized West.
Throughout the region, barter trade is a thing of the past. The low quality of the region's products means that former trade partners are all seeking to buy in the
It is understandable that the other part of Comecon has wanted to retain some variant of the old structures. The economies of Bulgaria and Romania (not to mention Cuba) are very closely bound to the Soviet economy. For example, Bulgaria imports more than 70% of its fuel needs, mostly from the USSR, and that country is by far Bulgaria's largest trade partner. Nonetheless, even in Sofia, "reformist" tones are
At the start of February, the new coali-
Dimitri Popov submitted its "Programme for Transition and Hope" to the IMF, seeking new credits in return for a new squeeze. And indeed $3bn in "fresh money" was designated to bring new hope to the govern-
It will be for the rest of the population to see to the transition side of things. Freeing of prices at the start of February saw average rises of food prices of 500%. In spite of this attempt to strangle the consumers, and an expected rise in unemployment from 70,000 to 300,000, Popov the Reformer envisages an "optimistic social partnership". The unions' optimism found its expression in a commitment to refrain from strikes until the elections in May. As Popov put it: "Bulgarians have finally understood that this is how things must be". On a recent visit to Germany, trade and industry minister Ivan Pushkarov presented the alternative as: "reforms or elecThings are going the same way in Romania. Petr Roman and his circle are hoping to get hard currency through the "shock therapy" routine (price rises, an end to subsidies, plant closures and mass unemployment). And those who protest and incite demonstrations become guilty of contributing to the economic misery and will be labelled as opponents of reform.
All the Comecon states are in recession. The WIIW is predicting a further downturn this year. Factors in this are the higher energy costs owing to the introduction of pricing in hard currency, the beginning of the recession in the West, and high interest rates on the international financial markets due to investments in east Germany and the USA's public debt.
At the moment some 34 million people in Eastern Europe are living below the poverty line. This figure is certain to rise. Which of the Eastern European economies will come struggle for survival is as yet unclear. However two things can be stated with confidence: (1) the decision about this will be taken in the centres of the "free market economy", not in the countries concerned; and (2) the losers from the "renovation" will be the workers, and above all women workers, there. *
The balance swings
SOUTH AFRICA their areas and schools in this way.
This is being confirmed by a number of new bills introduced before Parliament which will replace the repealed legislation. These new bills, if they become law, will continue to give white government officials vast powers to limit the impact that the repeal of apartheid will have. For