Industrial restructuring in Central and Eastern Europe

This paper provides a comprehensive assessment of issues related to the res tructuring of large industrial enterprises in Central and Eastern Europe. T he experience with industrial restructuring in the region to date suggests that policies aimed at promoting restructuring should focus on: (i) improvi ng the given investment climate by reducing bureaucracy, eradicating corrup tion, and rationalizing taxes and tax collection, (ii) strengthening social safety nets - including balanced unemployment benefits and the provision o f redundancy packages - with strong emphasis on retraining schemes and labo r mobility, and (iii) reducing soft budget constraints (primarily direct su bsidies), soft bank loans, and tax arrears.