The competitiveness of the countries of Eastern Europe and the South Caucasus (EESC) is analysed using the Global Competitiveness Index (GCI) of the World Economic Forum and the 12 pillars which determine the level of productivity of a country. Armenia, Azerbaijan, Georgia, Republic of Moldova and Ukraine are compared to both EU Accession 12 countries and transition countries. As a group, their major competitive advantage is labour market efficiency, while inefficient infrastructure and poor quality of education dominate as challenges. They also differ in their technological readiness, higher education and training, the quality of their infrastructure and the stability of their macroeconomic environment. Their business environment must be more supportive of entrepreneurship, new business, trade and foreign direct investment, as well as reducing the dominance of large firms in key markets. The reforms of their financial markets have taken a step backwards during the recession, with particular problems in access to finance for the business community and a need to stabilise the banking system.