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The case uses Bulgaria as an example of an Eastern European economy of transition. The outline of the case is as follows: (1) brief description of the main facts about the country and the economic developments during the communist years; (2) the challenges of the early transition years and the 1997 financial crisis, focusing on issues common to Eastern European countries: high social cost of reforms, dependent central bank, hyperinflation and currency devaluation; (3) the currency board arrangement, its successes (macroeconomic stability and improved image of the country with international investors) and challenges (high social cost due to severe reduction of budget deficit and high current account deficits due to real appreciation of the Bulgarian lev); (4) trade and competitiveness of the Bulgarian economy: change in trading partners and trade specialisation since 1989 and due to European Union (EU) accession; sustainability of Bulgaria''s competitive advantages; (5) the economy in 2004 - current state and main challenges: strong gross domestic product growth, excessive credit growth, excessive dependence on foreign direct investment; and (6) overview of the EU accession process: can 2007 be considered a sure entry date for Bulgaria? What new challenges will the country face after accession?