East Europe Rings in the New Year With Market Reforms, Price Hikes

Governments in many of the new democracies of Eastern Europe rang in the new year Tuesday with one of the legacies of their recent Communist past--another round of price hikes.

In Poland, prices went up for electricity and fuel, while Hungarians will see rises this month in bakery products, sugar, flour, rice, cosmetics and household chemicals.

In Czechoslovakia, a long-delayed price liberalization took effect with the introduction Tuesday of new economic reform measures which, although wide-ranging, fell far short of Poland’s “big bang” of exactly one year ago.

In all these cases, however, the price hikes were the result of attempted adjustments to market prices, and not--as in the past--an arbitrary attempt to put huge government deficits back into balance.

But the most important change in 1991 in Eastern Europe will be the transition to a hard-currency system of trade among countries of the former Soviet Bloc.

After 40 years of an ineffective system of settling accounts that often boiled down to barter, trade transactions are now based on world prices.

But the adjustment will initially be a shock for former members of Comecon. Total trade among them is expected to fall sharply initially because of the general economic crisis in post-Communist countries and a decline in demand, particularly for capital goods.

In Poland, for example, the changeover to dollar settlements will mean a trade deficit of $2 billion and a fall in turnover with East European partners of 30%.