world's market economies. Macroeconomic stabilization – bringing inflation under control and lowering it over time, after the initial burst of high inflation that follows from liberalization and the release of pent-up demand. This process requires discipline over the government budget and the growth of money and credit (that is, discipline in fiscal and monetary policy) and progress toward sustainable balance of payments. Restructuring and privatization – creating a viable financial sector and reforming the enterprises in these economies to render them capable of producing goods that could be sold in free markets and transferring their ownership into private hands. Legal and institutional reforms – redefining the role of the state in these economies, establishing the rule of law, and introducing appropriate competition policies. According to Oleh Havrylyshyn and Thomas Wolf of the International Monetary Fund, transition in a broad sense implies: liberalizing economic activity, prices, and market operations, along with reallocating resources to their most efficient use; developing indirect, market-oriented instruments for macroeconomic stabilization; achieving effective enterprise management and economic efficiency, usually through privatization; imposing hard budget constraints, which provide incentives to improve efficiency; and establishing an institutional and legal framework to secure property rights, the rule of law, and transparent market-entry regulations. Edgar Feige, cognizant of the trade-off between efficiency and equity, suggests that the social and political costs of transition adjustments can be reduced by adopting privatization methods that are egalitarian in nature, thereby providing a social safety net to cushion the disruptive effects of the transition process. The European Bank for Reconstruction and Development (EBRD) developed a set of indicators to measure the progress in transition. The classification system was originally created in the EBRD's 1994 Transition Report, but has been refined and amended in subsequent Reports. The EBRD's overall transition indicators are: Large-scale privatization Small-scale privatization Governance and enterprise restructuring Price liberalization Trade and foreign exchange system Competition policy Banking reform and interest rate liberalization Securities markets and non-bank financial institutions Infrastructure reform Context The economic malaise affecting the Comecon countries – low growth rates and diminishing returns on investment – led many domestic and Western economists to advocate market-based solutions and a sequenced programme of economic reform. It was recognized that micro-economic reform and macro-economic stabilization had to be combined carefully. Price liberalization without prior remedial measures to eliminate macro-economic imbalances, including an escalating fiscal deficit, a growing money supply due to a high level