We analyze the problem of soft budget constraints of enterprises financed by banks in transition economies and review the similarities and the differences in various models addressing that issue. We reconstruct these models as several variants of a basic sequential model of soft budget...

Soft budget constraints (SBCs) are a persistent feature of transition economies and have been blamed for i.a. a lack of fiscal consolidation and sluggish growth. EU eastward enlargement has - among other things - been conditioned on tackling SBCs. This paper analyzes such outside conditionality...