AbstractEast European societies currently in transition to market economies are creating new structures for industrial relations. Transition has ambiguous effects upon the relations between industrial relations institutions and the state. On the one hand, economic pluralism implies separation between state and economy and ‘depoliticization’. On the other, economic crises and threats to social order require co‐operation between state and unions. The influence of the state is greater because of the embryonic form of employer organization and enterprise‐level management. This paper examines the political and economic contexts of industrial relations in Bulgaria, as an example of one type of ‘constrained’ collective bargaining system. The paper emphasizes continuities between the communist and post‐communist period, and the central role of trade unions in the trans