This Briefing Paper examines the reforms currently taking place in eastern/central Europe and the major problems encountered in the reform process. The paper assesses the implications of these developments for developing countries (LDCs). It is concerned primarily with Bulgaria, Czechoslovakia, Hungary, Poland, Romania and Yugoslavia. In many respects the outcome of economic reforms now underway, as well as their external effects, is still unclear. The paper argues that rapid change in eastern Europe has captured the imagination of decision-makers in the West, and revealed new possibilities (and some threats) to the political establishment in many LDCs. However, the political and economic outlook for eastern Europe - and, by extension, LDCs - still depends critically on its much larger neighbour, the USSR.