SLOVAKIA's economy is still in recession, and the recent re-invigoration of the arms-producing industries there (nearly a quarter of its economic product during the Cold War) will not be viewed well in Brussels. The CZECH REPUBLIC seems to remain part of the old Austro-Hungarian Empire: Prague, despite its fantastic beauty, has not become a center for foreign companies to locate because of heavy bureaucratic restraints on renovation and restrictions on office space. HUNGARY remains crippled by a huge foreign debt that started in the 1980s with the importation of consumer goods to assure domestic political satisfaction. POLAND is the only possible bright spot, thanks more to Jeffrey Sachs's lobbying the U.S. Congress for debt forgiveness than to his "shock therapy." Even so, the country's "social safety net" impoverishes the government's budget, and this problem is endemic to the region. (In Hungary, the pension system is set for bankruptcy in the first decade of the 21st century.)

Even if the Prague and Budapest bourses down half from their 1994/95 highs, and the Warsaw exchange is down two-thirds, this does not mean that there is a buying opportunity. Financial and political uncertainty in all these countries outweigh possibilities for a good play. Even more to be avoided are new speculative listings on Western bourses. Two plays on the expansion of the Hungarian telecommunications industry, for example, opened in 1994 on the U.S. NASDAQ exchange in single digits, quickly shot up into the 20s and then collapsed almost as quickly to below their original offer where they now remain.

Some Unconventional Sense

International financial relations are vital. They are linked to macroeconomic issues like convertibility, borrowing, and currency reform, and to microeconomic issues like privatization and price reform. (This is why a ruble stabilization fund was such a hot topic when the Soviet Union was falling apart a few years ago.) Economic reform throughout the former Communist bloc places additional claims on world savings, which are already in short supply. Under Western prodding, the Visegrad-4 have formed a payments union and now a free-trade association. This doesn't hurt, but more help is needed than appears on the horizon. Reasonable estimates are that the Visegrad countries require US$12 trillion over the next 20 years (equivalent to 5% of West European GDP), with short-term requirements of US$40 billion. Joining the EU, or any other international institution including the IMF and the World Bank, is no panacea.

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DR. ROBERT M. CUTLER was educated at MIT and The University of Michigan, where he earned a Ph.D. in Political Science, and has specialized and consulted in the international affairs of Europe and Eurasia for twenty years. He has held research and teaching positions at major universities in the United States, Canada, France, Switzerland, and Russia, and contributed to leading policy reviews and academic journals as well as the mass media in three languages.