CENTRAL EUROPE was the place to be in the spring of 1990. The annus mirabilis was over but post-revolutionary euphoria lingered on. A new political class was only just coming to terms with the sheer scale of the moral and physical catastrophe inflicted by Communism in the previous 45 years. However, nobody was in any doubt that these societies were embarking upon one of the most dramatic and hopeful transformations in human history.

The memories from a trip I made then remain powerful. There was the frail, blinking Lothar de Maiziere surrounded in his campaign office by theological tomes and music sheets, perhaps the most improbable politician I have ever seen, but the leader of the Christian Democrats in East Germany's first and last free election. In a study within the walls of Prague Castle, the newly elected President Vaclav Havel was to be found working on stage directions for the changing of the guard. From Warsaw's Finance Ministry, Leszek Balcerowicz was turning Poland into a laboratory to test the principles of market economics. Although he was pale and desperately overworked, I will never forget how he radiated that special calmness that is given only to those who are unassailed by doubt.

Since then, Poland has been through five governments and acquired Lech Walesa as President; in Germany, self-confidence and hope have given way to uncertainty and recrimination; and, without so much as a backward glance, the leaders of Czechoslovakia have agreed to break the country in two. A return visit was long overdue.

First stop is sleepy Bonn, an increasingly absurd capital for the new Germany. There is a steadfast refusal on the part of any senior government official here to admit that even the smallest mistake might have been made over the handling of unification. They accept that rebuilding the east is going to take more time and money than they had expected, but that is because everything is so much worse than they at first realised.

What is startling is that they really didn't know how bad things were. It is partly because they wouldn't use the evidence in front of their eyes. But mostly it is because they couldn't accept that fellow Germans, albeit Communists, could create such a frightful economic mess.

Peter Hartmann, Chancellor Helmut Kohl's senior foreign affairs adviser, echoes this theme. Economic reconstruction of the east is one thing, creating from scratch a civil society is another. The problems are mostly to do with what is in people's minds, and nobody knows how long - a few years or two generations - it will take to cure the sickness.

The other great and connected issue is the growing spate of neo-Nazi attacks on foreigners and the difficulties of getting the necessary two-thirds majority to change Germany's ludicrously permissive asylum laws.

ONE OF the first things you notice crossing into the east (and that is what it still feels like) is that most of the Trabbies and Wartburgs have disappeared. Nearly everybody used the Deutschmarks handed out by Bonn to go and buy a second-hand BMW or Audi.

At first sight Dresden looks different. Neon lights, giant cranes hanging over the old town centre on the west bank of the Elbe and rush- hour traffic jams. But Kurt Biedenkopf, Prime Minister of Saxony and the only heavyweight West German politician to have made a career in the east since unification, admits it is a small start; much time and money is going to be needed to bring about the transformation.

Unlike his former colleagues in Bonn, Biedenkopf is passionately convinced that the sacrifice will eventually benefit the whole of Germany - and is fed up with people in the West talking as if this was an intolerable burden. 'It's a fantastic opportunity,' he says.

Arriving in Berlin from the south-east is a curiously moving experience. The simple act of driving up Unter den Linden, turning left at the Brandenburg Gate and finding yourself on the Ku'damm is enough to make one shout for joy. The next morning I meet the formidable Barbara John, who heads a Berlin office concerned with the welfare of foreigners. Even she says a change in asylum law is essential. The failure to gain control of a situation which has seen half a million 'refugees' arrive in Germany in the past 12 months has led to a complete loss of faith in the political establishment. She says: 'Liberals who are looking for an ideal solution are not living in the real world.'

The various Berlin politicians I talk to are unanimous on one thing: Bonn (very nice, very Swiss) does not understand the scale of the task in the east. Until Berlin reverts to being the capital at the end of the decade, Germany will continue with its comfortable and inadequate politics.

Of course, German money and efficiency will haul up the shattered eastern provinces. Yet of all the post-Communist societies of central Europe, the eastern Germans seem the most miserable. They have money, but they have least in the way of self-respect. Everything is being done for them by people who are patronising and frequently find it hard to conceal their contempt. It is not all going wrong in a 1933 sense. Such fears are absurd. But there is a sickness of the soul in eastern Germany which will take many years to banish.

CROSSING the border into Poland on the eastern bank of the Oder is straightforward for car drivers, although the queues of lorries stretch back several miles into Germany. Apart from radar speed traps, the occasional horse- drawn cart and a bewildering number of roadside stalls selling large garden gnomes, the 150- mile drive to Poznan, half-way between Berlin and Warsaw, is smooth and quite quick. The second leg of the journey to Warsaw is an arduous slog spent dodging in and out of the path of huge trucks. The landscape has barely altered for 300 miles: flat agricultural land broken only by the occasional slag heap or the winding gear of a pit.

Bronislaw Geremek, the wise old owl of Polish liberal politics and one-time intellectual mentor to Lech Walesa, is not given to optimism, but he thinks things are not going too badly. He believes the consensus behind the economic reform programme is fairly robust and makes the point that in the post-Communist countries economic policy has been effectively de-ideologised. The crucial ideological split in Poland is not about privatisation and the market economy, but issues such as abortion and religious teaching: between traditionalism and liberalism.

The biggest danger he sees is that fear and frustration may be exploited by extreme politicians who think that authoritarian solutions could assist economic transformation. Fortunately, President Walesa is behaving himself and playing the crucial role of lightning conductor for people's discontent, while allowing the government of Hanna Suchocka to get on with things.

Ministers in the Suchocka government are similarly positive. Almost to their surprise, they have seen a slight improvement in economic growth since the summer. They are just beginning to dare hope that the private sector, which now represents more than 20 per cent of economic activity, has reached take-off point. Mrs Suchocka's chef de cabinet, Jan Maria Rokita, says that there will have to be many years in which consumption is restrained in favour of investment to repair the years of economic vandalism. 'Communism was a war which ruined the country,' he says.

Janusz Lewandowski, Privatisation Minister, says there is a recognition that Poland was not an underdeveloped country, but one which had been misdeveloped; highly competitive Polish wages are helping to bring in new foreign investment. Of his privatisation proposals, which will take 600 firms into the private sector next year, Lewandowski says: 'There should always be a reward in eastern Europe for being brave and getting things moving.'

I ask him what has become of Leszek Balcerowicz, hero of his country's economic revolution. Balcerowicz is now a university teacher, he says. When he left office last year he was burnt-out, exhausted by the strain.

Before reaching Krakow, the old capital of Poland and home town of the Pope, I pass through Katowice, 60 or so miles away, a sprawling industrial conurbation which is a Dantesque vision of hell. The air has a sweet, greasy smell like rancid cooking fat mixed with chemicals. It is impossible not feel both anger towards the maniacs who created this industrial devastation and overwhelming sympathy with the wretched people who have to live and work in this place.

Krakow is so damaged by pollution from Katowice, as well as from the nearby Nova Huta steelworks, that it has had to be designated an environmental disaster area. Not only do its citizens suffer all manner of respiratory diseases, but the poison in the air is destroying the very fabric of the beautiful old town. Press your finger into any of the stone buildings and it feels like dried sponge.

Yet for all the hardships in Poland, it hard not to share in the government's quiet optimism. The fact that the Poles never succumbed spiritually to Communism is one of the reasons for the country's resilience. There is a natural Polish entrepreneurialism which is already acting as a motor for the private sector. And the economic reform programme is solidly based, despite the rise and fall of governments.

EN ROUTE to Bratislava from the border of the about-to-be Republic of Slovakia, one passes through single-industry towns which the Communists dotted around the pretty Slovak countryside and which now present a formidable obstacle to modernisation. Shut down the grim, smoke-belching factories and the towns built to service them will die, too. This is one reason for the Czech-Slovak split, which becomes official on 1 January. The pattern of industrialisation in Slovakia has understandably made its people more fearful of economic reform than the Czechs, who have an advanced industrial culture going back 150 years.

The Slovaks, who in June voted in a nationalist government headed by the volatile former Communist Vladimir Meciar, were particularly cross that a sanctimonious Czech-dominated government in Prague seemed prepared to close the one part of the Slovak economy with a ready international market for its goods - the armaments industry.

Bratislava itself is unrelievedly depressing. It quickly becomes apparent that very few Slovaks are anything other than fearful and regretful about the indecently hasty 'velvet divorce' from the Czechs. Talking to a close parliamentary ally of Meciar's, I get the impression that this split would not have happened if there had not been a chip-on-the- shoulder sense of Slovak inferiority to exploit and plenty of jobs as a reward for the boys who did the exploiting. What has shaken ordinary Slovaks is the realisation that the Prague government was only too pleased to rid itself of Slovakia's special problems.

The Slovak opposition sees nothing but trouble ahead. The Christian Democrats already discern authoritarian tendencies in Meciar - the sacking of an independent-minded director of Slovak Television and the threat to close a troublemaking university are straws in the wind - which are likely to intensify when the government's promise of finding an easier path to economic reform is proved hollow.

If the government hits trouble next year - and few doubt that it will - the search for scapegoats is likely to begin and end swiftly with Slovakia's 600,000 ethnic Hungarian minority. Any perceived ill- treatment of the Hungarian minority is likely to send nationalists on the other side of the Hungarian border into a frenzy.

Nobody thinks there will actually be fighting between Slovaks and Hungarians; neither like guns as much as the Yugoslavs. But an interview with the deputy prime minister, Roman Kovac, is not reassuring. He rules out any concessions to Slovakia's Hungarians with a chop of his hand.

Prague is a world away from sad Bratislava. There are new shops and restaurants everywhere, churches and historic buildings which used to open only on the most capricious basis are now lit and welcoming, black-market currency dealers have vacated their pavement space to hookers. In short, Prague is a tourist boom town, even in winter fog. But, except in government, there is

also a feeling of regret, and self- criticism, about the imminent divorce.

Unlike the Slovaks, the Czechs have little fear about what the future holds. They are confident that, free of the Slovaks and so close to Germany, their economy will power ahead. Jiri Weigl, a gung ho adviser to the Prime Minister, Vaclav Klaus, says that the private sector accounts for nearly a fifth of industrial production, and the radical voucher privatisation scheme has created a nation of shareholders. With inflation at 10 per cent and falling, the budget in rough balance and relatively little foreign debt, he believes the economy will take off. His sub-text is that the new Czech Republic is hoping that with German backing it might get a fast track to full membership of the EC.

Across town in an apartment over looking the River Vltava, a bizarre press conference is taking place. Crammed into an ordinary sitting room is just about every journalist in Prague. Television lights are turning the room into a furnace, the table has all but disappeared under a sea of pocket tape recorders.

Here is private citizen Vaclav Havel, until a few months ago President of Czechoslovakia. Citizen Havel, who walked out of office because he refused to preside over the dissolution of the state, has something to say. After much thought, he is going to allow his name to go forward as a candidate for the presidency of the Czech republic. He feels there is still an important job for him to do, fighting in the new state for the moral values he believes in, and he obviously sees himself as a necessary counter to the tough-minded market materialism of Prime Minister Klaus.

'I don't think that Klaus and I differ on principle - maybe on emphasis,' Havel says, tactfully, to me. 'I am probably more aware of the crisis in our civilisation that goes beyond individual economic systems, such as hate, nationalism, the ecological threat, over-materialism or religious fundamentalism. He is more concerned about rebuilding the market economy.'

Jiri Dienstbier, former foreign minister and an old friend of Havel, puts it more succinctly: 'We cannot create a new state from VAT. We need the balance of Havel's humanistic values with the determination of Klaus.'

It is, indeed, not a bad combination. Lucky Czechs, sad Slovaks.

(Photographs omitted)