Financial Aspects of Adjustment and Transition towards EU Membership: Turkey and Eastern Europe

Although their recent history of socialist central planning distinguishes their point of departure, the Eastern European countries share with Turkey the ultimate objective of membership of the European Union. This common goal, with its implication of close integration between domestic and international markets, links the notions of economic ‘adjustment’ and ‘transition’ frequently employed by the multilateral institutions. Whereas the latter term has been used to describe the process of insertion into the world economy of countries, which had earlier attempted to dispense with the price mechanism altogether, adjustment policies are required in heavily distorted market economies before the benefits of liberal trade can be fully realised. Transition could therefore be regarded as comprising adjustment plus the institutional transformations required to allow a market economy to function at all. Since institutional changes typically involve the abandonment of administered prices and the privatisation of assets, however, it appears that differences of degree rather than kind separate the two concepts.