Slovenia is the unquestionable leader in Eastern Europe. In transition economi es a high inflation rate is a price that must be paid for a low unemployment rate. This does not seem to hold in Eastern Europe where, paradoxically, an increase in unemployment rates bri ngs about an increase in output. A high official unemployment rate often denotes an imposition of a harder budget constraint. This improves work discipline and reduces hidden unemployment.
High inflation is a result of an increase in money supply.
The money is used by the state to finance a budget deficit that is generated by subsidies that go to enterprises in order to help them finance the hidden unemployment. The mood among forecasters is good. In 1995 and 1996 inflation rates and budget deficits should shrink dramatically. Privatization will continue. Many Eastern European economies should expand at Asian tiger rates.