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. Last Updated: 07/27/2016

EBRD: Reforms Impressive, But Tough Times Still Ahead

LONDON -- Efforts in Eastern Europe and the former Soviet Union to switch to a market economy have been impressive, but some of the toughest problems lie ahead, the European Bank for Reconstruction and Development said Monday.

In its annual report of the region's transition since the Berlin Wall fell seven years ago, the bank focused on the need to raise domestic savings and improve a rickety infrastructure that was built with scant attention to either the consumer or the environment.

"From a historical perspective, it is likely that the pace of progress will be seen as remarkably rapid in much of the region," said the bank's chief economist, Nick Stern. "However, the legacies of a command economy cannot be overcome in a few years. Major tasks remain in taking reform forward."

Among the major advances has been the success of the mass privatization in countries of the former Soviet Union, Albania and Romania.

Countries with more sophisticated economies, such as the Czech Republic and Hungary, have begun to privatize their utilities and transport industries.

The EBRD noted that $6 billion in foreign investment came into the region's major infrastructure firms since 1990, mainly into telecommunications, gas and electricity firms.

"However, some of the more difficult tasks at the heart of transition, such as enterprise restructuring, the rehabilitation and rebuilding of infrastructure, and the building of strong financial and legal institutions, have a long way to go," Stern said.

In the financial sector, the report took note of "a new spate of banking troubles" in Russia, Bulgaria, the Czech Republic, Kyrgyzstan, Latvia and Lithuania.

Higher living standards can be sustained only with increased savings, the report said. But household savings have not increased enough to offset the substantial drop in the corporate and government sectors over the past few years.