Macroeconomic and Fiscal Challenges Facing Central European Countries During the EU Accession Process

At the end of 1997 five transition countries - the Czech Republic, Estonia, Hungary, Poland, and Slovenia - were invited to start negotiations on their accession to the EU. Three other countries - Latvia, Lithuania, and Slovakia - may still join the first group. Two other countries - Bulgaria and Romania - have concluded free trade and association treaties with the EU and have less clear accession perspectives, as their transition performance has lagged behind the frontrunners. The purpose of this paper is to present an overview of the main macroeconomic and fiscal challenges that may appear during the accession process, and indeed post-accession. Attention will be concentrated on fiscal problems, since fiscal performance plays a crucial role in determining of macroeconomic balances. At the same time, it also often reflects the progress achieved in structural and institutional reforms. The paper summarizes the results of the comparative ACEPHARE research project on "Medium and Long-Term Perspectives of Fiscal Adjustment of Selected Central European Countries" (P96-6089-R), which covered four Central European countries: the Czech Republic, Hungary, Poland, and Romania.