Boom and Bust in Central and Eastern Europe: Lessons on the Sustainability of an Externally Financed Growth Model’

Abstract

This commentary shows the patterns of a production model in Central Eastern Europe (CEE) that was based on a specific division of labour within the enlarged Europe. Its foundation was a newly emerged manufacturing base in Central Eastern Europe (CEE) and it was seen as a prerequisite for economic renewal in post-communist countries. This production model seems to be in danger now. The first section highlights the main elements of the process where CEE production locations became integrated into the value chains of western European manufacturing enterprises. The example of the automobile industry demonstrates the principles of this production model of with its particular pattern of division of labour between the East and west of Europe. The foundations of the past success have however proved to be fragile, as the dramatic effects of the economic crisis show us these days. The second part of the paper shows, how the particular pattern of the division of labour between East and West have become a risk factor and its sustainability is being questioned.