It may be necessary for governments to take over bad loans inherited from the communist era. This would enable some credit institutions to conduct business more effectively. In order to prevent moral hazard, the rescue of selected credit institutions can only take place under certain conditions, most likely including the lay-off of those responsible for making these loans.
Importantly from a macroeconomic point of view, any debt restructuring involving government money should find expression in official figures for government debt. This would provide a better insight into the actual financial situation in the countries of Central and Eastern Europe. Reducing uncertainties in this respect is likely to build up confidence and attract rather than deter foreign investors.