provides a guideline for actions to be taken by transition economies along this way. For many countries in the region, accession to the EU is, in fact, considered also as a final stage of the transition process (see Fidrmuc, for example, for a discus- sion of relations between CEECs and EU). At the June 1993 Copenhagen Euro- pean Council, the EU set conditions for those associated countries of CEECs and the Baltic States who wish to join the Union. Besides political criteria (stability of institutions guaranteeing democracy) and legal requirements (adoption of the acquis communautaire), the Council adopted the following two economic criteria: (a) the country should be a functioning market economy, and (b) the country should have a capacity to cope with competitive pressure and market forces within the EU. These two criteria clearly indicate that the transition process and accession to the EU are by and large two sides of the same coin. An accession country from the region will not be able to become an EU member unless it substantially completes its process of economic transition. 4.2 Overview of macroeconomic performance Output All countries in transition experienced a substantial decline in recorded output in the early years of transition. The initial output loss reflected: (a) the introduction of price and exchange rate liberalism resulting in a significant cut of domestic purchasing power, (b) general collapse of the former system of enterprise linkages and finance, and (c) the breakdown of the socialist trading block. The difference in initial conditions and policies led to a much greater decline at the beginning of transition in the CIS than in the CEECs. There is another difference between these two groups of countries with respect to output develop- ment over the recent decade. In the CEECs (and the Baltic States), output since 1989 has followed a U-shaped pattern, with the minimum point being reached in 1992 or 1993. As a result, the aggregate output of the group almost returned to its 1989 level. In some CEECs, the output in 1999 already surpassed the one from the pre-transition period; Poland (index 114), Slovenia (index 104) and Slovakia (index 100). In contrast, the output pattern in the CIS, except the Baltic States, has been one of continuous decline with the exception of 1997. Consequently, the GDP for this group of countries was in 1999 only slightly more than one half of its pre- transition level. The output developments for this group of countries have been strongly dominated by the performance of the Russian Federation where GDP in 1999 was equivalent to 55 per cent of the one registered in 1989 (EBRD, 1999, p. 73). Not all sectors of the economy were equally hit by the beginning of their transformation from centrally-planned to market-based systems. Trade liberaliza- tion, the new power of consumer preferences and the cut-back of defence spend- ing are only some of the reasons explaining why industrial growth rates were even more disappointing than the GDP rates.
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