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The report examines the main macroeconomic issues faced by Estonian policy makers at the present stage of the reforms. The next section below examines trade and balance of payments issues, and identifies policies required to promote the integration of the Estonian economy with other market economics while preserving critical links with the former Soviet republics. The study analyzes the recent fiscal trends and main issues in the fiscal areas; it also discusses fiscal policy changes needed to support a successful currency reform and reforms in other areas of the Estonian economy. Social safety net issues, which have close links with fiscal policy, are examined in the final section of this chapter. The main systemic reform issues currently faced by Estonian policy makers examine the legal and institutional framework guiding economic activity in Estonia, and identifies the policies and strategies that are required to promote the development of private sector enterprise. The report deals with financial sector reform, reviewing the performance of Estonia ' s financial institutions, and identifying the policies that will allow the Estonian financial system to play a central and independent role in the allocation of scarce resources. The policies required to prevent the emergence of poor wage discipline during the transition and these reforms are demanding with prospects for their successful implementation enhanced by appropriate technical assistance.
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