This report looks at the nature of unemployment in CEE countries and analyses the determinants of labour supply and demand to predict where market equilibrium should be. The authors conclude by looking at the role of policy, arriving at a set of proposals for enhancing labour supply. These include: better integration between unemployment benefits and social assistance; the maintenance and development of active labour market programmes; direct translation of savings in social policy spending resulting from future declines in unemployment into reductions of statutory contribution rates; abolition or reduction of non-negotiated restrictions on job and labour turnover via severance benefits or firing costs; increased spending on general secondary education; and investment into the infrastructure of transportation. This is a concise yet comprehensive account of the labour market issues facing CEE countries as the transformation proceeds and they negotiate their entry into the EU. It will be of interest to anyone concerned with the economics of transition and economic policies in the region.