The Eastward Expansion of the European Union and the Transformation of the Financial System

Abstract

Accession to the European Union by countries in Central and Eastern Europe is a widely supported political imperative. Accession involves acceptance of the development of a fundamentally capitalistic economy in which the role of the state in these countries must be recast. The creation of such economies may take widely varying forms, ranging from crony dominated to the relatively honest and stable. These outcomes matter greatly to citizens of these states. The reform of the financial sector is particularly important, as its effective operation underpins the wider economy. The creation of an effective system of bank supervision, coupled with the development of strategic foreign investment in the banking system, seems to offer the best way of creating a more honest and stable financial regime.

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