ECONOMIC UPHEAVAL IN EASTERN EUROPE: ECONOMIST TALKS OF TROUBLED TIMES

CAPE GIRARDEAU -- The nations of Eastern Europe face difficult times ahead as they attempt to establish free market systems and revitalize their economies, a U.S. State Department economist said Thursday.

"The countries of Central and Eastern Europe ... are engaged in one of the greatest social transformations of this century," said George Noroian, an international economist who currently works on East-West economic issues in the Bureau of European and Canadian Affairs.

Noroian spoke to a crowd of more than 100 people, most of them students, in a speech Thursday at the University Center on the campus of Southeast Missouri State University.

The event was sponsored by the university's departments of political science and economics, and Southeast's School of University Studies.

Noroian said the Eastern European nations are trying to implement democracy and free-market economic systems.

But they face serious problems and it will be "a painful process," said Noroian. After years of communist rule, their economies are in shambles, he noted.

Those countries are facing high inflation, growing unemployment, rising ethnic tensions, and there's still a shortage of goods in many cases, he pointed out. The infrastructures are in bad shape and their is "tremendous environmental damage."

In the past, the Eastern Europe countries had an extensive bartering system with the Soviet Union. "They depended on the Soviet Union for oil, natural gas and other raw materials," said Noroian.

But the bartering system has fallen apart.

"On top of all this, Eastern Europe is in the middle of an energy crisis," he said.

Not only have the Soviets cut back on delivery of oil to the region, but the Persian Gulf crisis has shut off the supply of Iraqi oil to the Eastern European countries, Noroian said.

Until the gulf crisis, Iraq had been supplying oil to some of these countries as payment for such things as loans and weapons.

Oil is now increasingly in short supply in Eastern Europe, the economist said.

Poland and several other Eastern European countries have removed price restrictions in a move toward establishing free-market systems. That has led to rising prices for goods, which has sparked protests by some of the citizens.

But Poland has recovered some, fueled by the removal of price restrictions, the devaluation of the currency by 70 percent, the slashing of the government's budget deficit and efforts to slow the growth of the money supply.

"Thirteen months ago, inflation was 840 percent a year in Poland," said Noroian, "and productivity was very low."

Today, he said, Poland's currency is fairly stable. Inflation is now down to 60 percent a year. In addition, for much of 1990, Poland had a trade surplus.

There are more commodities available now. "Poles can buy Polish hams for the first time in decades," said Noroian.

He added, however, that Poland and the other Eastern European countries still face painful economic times ahead.

"They alone have to suffer the hardships of reform just like they suffered the indignities of communist repression," he said.

"Democracy is still very fragile there," he noted. "They are like children learning how to walk. They are going to fall down."

The U.S. and other Western nations have tried to assist the nations of Eastern Europe, both with loans and technical assistance.

Private investment by U.S. businesses and those of other nations can help, said Noroian.

"These countries are not out of the woods yet. ... But with our encouragement and our help," said Noroian, "I believe they are going to make it."