Against the backdrop of a weakening global economy and volatility in international financial markets, countries of the Europe and Central Asia region (ECA) are transitioning to a new normal that is characterized by low commodity prices, slow trend growth of global trade and less abundant availability of international liquidity. The transition is challenging because the region has not still fully recovered from the after-effects of the global financial crisis and current volatile conditions in international financial markets create headwinds. The eastern part of ECA faces the difficult adjustment to low commodity prices. That adjustment comes with sharp real deprecations, job losses in construction and domestic services, falling asset prices (especially real estate and equity prices), increased fragility in partly dollarized financial sectors, and declining household incomes. However, that adjustment comes also with new opportunities in the tradable sectors. To seize these opportunities policy makers have to embrace the new normal, using flexible exchange rates, absorbing negative side-effects, and facilitating investments in new sectors. In the western part of the region the recovery remains fragile. In Southern European countries, access to finance will not be as easy as it had been before 2008, but there are now real opportunities to leave the crisis behind and to steadily create new jobs. Policy makers can seize these opportunities if they move beyond firefighting and create conditions for reinvigorating competitiveness.