Bright Prospects for Eastern Europe

VOLKER EBERMANN is understandably anxious. Like thousands of other former East Germans, he recently was laid off from his job, a victim of the economic reconstruction sweeping Germany following its reunification. After being trained to take orders, will he be able to learn how to take initiative? Will he and his wife Karin be able to cope with skyrocketing prices now that the old East German mark has vanished? But beneath this anxiety lies a deep sense of exhilaration. Extraordinary things are now possible. A shiny new VCR sits in his apartment. He has just returned from his first trip abroad - to England. The excitement shows on his face. ``For the first time in my life, I'm free,'' he says. ``I can do what I want with my life.''

When I think of Eastern Europe today, a year after the dramatic revolutions brought down communism, I think of Volker. He has every reason to be anxious about the future. But he has even more reason to rejoice and to be confident.

The amazing has been accomplished. Multiparty elections have been held in Poland, Czechoslovakia, Hungary, and Germany. Independent newspapers proliferate. Public debate flourishes. People can travel without restrictions.

Remember that only a little more than a year ago, Vaclav Havel was in prison. Today, he is Czechoslovakia's president. In Poland, Solidarity leader and Nobel peace prize winner Lech Walesa has become president. Hungary is ruled by a coalition of former opposition leaders. Even the Balkan backwaters of Romania and Bulgaria are inching toward liberalization.

Despite the tragic events in Lithuania, few worry that the Soviet Union will invade and crush the newfound freedom. Mikhail Gorbachev is too preoccupied with problems at home to meddle abroad.

Germany is likely to remain the dominant country in the region. It represents a positive, prosperous, democratic example, one particularly valuable to the East Europeans because it too was built from the ashes of a failed dictatorship.

If the political climate looks relatively rosy, what about the economy? A conventional snapshot shows industrial production plunging, unemployment soaring, and incomes falling.

But the apparent signs of impending disaster actually suggest that a serious switch is under way to a market economy. The true disaster would be if factories continued to pour out unwanted products and sold them at a loss.

Restructuring is painful. It also is necessary. Pessimists forget the crucial message that today's factory closures open up the bright prospect of higher living standards in the long run. Newly unemployed Volker Ebermann knows this.

Official statistics mislead. In the past, most store shelves selling subsidized goods were empty. Now the subsidies are being ended - and so is the need to spend hours standing in queues. Estimates of falling production are based on comparisons with old communist figures, which bore little relation to reality.

Reform meanwhile has produced important successes. Foreign investment is beginning to pour into the region. A recent survey by the New York-based accounting firm DRT International showed that nearly all large West European companies plan to invest in the region over the next five years. About half of large US and Japanese firms have similar plans. ``The survey leads us to believe that investment commitments of anywhere from $20 billion to $50 billion may well be on the drawing board for the next five years,'' says Thomas Presby, a DRT managing partner.

Private enterprise also is booming, especially in Poland. An astounding 300,000 new private firms sprang up there last year, and existing ones are expanding fast, according to economist Jeffrey Sachs, who helped author Warsaw's reform plan.

True, these advances mean harder work, higher prices, jobless queues, and social tensions. Many Poles find themselves spending most of their paychecks on food and rent. In one year, the price of a one-bedroom apartment in Warsaw has risen by 400 percent. The new class of private entrepreneurs can pay. Beleaguered workers cannot. Most Polish wages have gone up less than 15 percent.

Three external shocks will aggravate these problems. First, East Germany's demise deprives the East Europeans of a major trade partner. In reunited Germany, struggling factories have rushed to cancel contracts with their former East European partners. Second, starting Jan. 1, trade with the Soviet Union switched to hard currency. Instead of bartering their oil for shabby East-bloc goods, the Soviets now sell their oil at world market prices. And third, the East Europeans face an additional oil shock from the Gulf crisis.

Stable, strong government is needed to cushion these shocks and implement deep and difficult economic reforms. In Poland, Lech Walesa is committed to reform and vows to take no shortcuts. If anything, his prime minister, Jan Krzysztof Bielecki, promises a healthy dose of faster reform, with quicker privatization and greater opportunities for foreign investors.

Other East Europeans are also putting forth bold market programs. After hesitating for a year, Czechoslovakia embarked on the rapid reform road on Jan. 1. Hungary should not be far behind. These countries know where they want to go - to join the European Economic Community.

Freed from the unnatural graft of communism and given Western financial and political support, the countries of Eastern Europe have a good chance of developing into prosperous democracies.

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