Problems and Perspectives of East-West-Economic Relations

Abstract

The opening of Eastern Europe and the transition of these countries to a market economy affect Europe and the rest of the world in different ways. In the goods markets, the additional export supply will lead to pressure for adjustment although its impact will be limited. As the export volume from Eastern Europe will not be large, the market increase in Eastern Europe for exports from the West also will remain limited. This might only change if the West were to provide large loans to Eastern Europe. However, this cannot be expected. The capital flows to Eastern Europe will be far below those which would be necessary to close the income and productivity gap between West and Eastern Europe within one or two decades.

One therefore has to expect that large income differentials will remain within Europe for long time to come. In addition, there will be migratory pressure. This will lead to adjustment problems for Western Europe’s labour markets, but could also offer long-term advantages for economic growth and for offsetting the ageing Western Europe’s labour force.