Labour in Central-Eastern Europe is widely regarded as a uniformly weak actor. We challenge this view, and explore the conditions under which CEE labour can play an active role in the welfare reform process. We draw on evidence from education and health care in Poland and Serbia, and show that public sector unions have largely retained their ability to prevent major restructuring and to defend employment-related privileges of their constituencies. The unions’ resilience is explained by the fact that the public sector in these countries remains sheltered from competitive pressures by delayed privatization, and by the extensive structural and associational power enjoyed by public sector employees.