Poland's debts: West's lever?
Must the West only stare impotently at the rollercoaster Polish crisis, or can it do something to help? Rep. Les Aspin (D) of Wisconsin insists that it can. Western bankers may wield less influence than Russian tanks in Warsaw, but they could help end Poland's long national nightmare, he feels.
"Strange as it may seem, Western bankers have their hands on the second strongest lever of influence [in the country] -- the fact that Poland is up to its ears in debts to the West," he declared in a report released Feb. 2 that examines Poland's economy and current political woes.
In essence, Representative Aspin is urging the United States and its allies to exploit Poland's indebtedness to the West in an attempt to find a peaceful resolution to the crisis that abated somewhat after last weekend's agreement between the Warsaw government and the Solidarity union movement on a five-day, 40-hour workweek. As a result of this agreement, a one-hour national strike set for Feb. 3 was canceled.
"What this all boils down to is the Western banks and governments should make it known that they are willing to keep Poland afloat only if Moscow accepts some fundamental reforms that would loosen political life in Poland without threatening Moscow," Aspin declares.
Asserting that Poland's perilous economic condition has bred the current political crisis, Aspin writes that almost all of Warsaw's $25 billion hard currency debt is held by Western banks and governments. Meanwhile, the cost of interest on this debt consumes nearly all that Poland earns in hard currency.
"This year alone Poland must borrow $11 billion to $12 billion," observes the Wisconsin Democrat. "It requires about $3.5 billion to $4 billion in new hard currency loans to finance [its] debt service and in order to continue running a trade deficit." He adds that it needs another $7 billion to $8 billion to refinance the third of its debt that comes due this year.
The prospect for next year, according to Aspin, is "more of the same" -- another $7 billion to $8 billion in refinancing charges added to $3.5 billion to from the West has virtually dried up. Aspin declares that "the banks might be willing to roll over what they are due this year, but only if Poland can come up with the $3.5 billion to $4 billion in new borrowing."
If Poland cannot obtain the money, it would be confronted with several "unpleasant" choices, he writes. "First, it could default and declare a moratorium on all payments of both principal and interest. . . . Second, [it] could repay the interest but suspend payment on the principal."
In both cases, he notes, Poland would lose Western credit and be forced to balance its import-export accounts with the West, resulting in "immediate and major cuts in imports of food, spare parts, and raw materials." The ensuing unrest in the country, stemming particularly from reduced food supplies at higher prices -- which have whipped Poles into a fury in past decades -- would inevitably lead to a Soviet invasion, he asserts.
But Poland does not have the third option of seeking a rescheduling or postponing of its debt, says Aspin. In his opinion, a properly coordinated rescheduling of the Polish debt could stabilize Poland's economy for the next year, provide a sound strategy for future Polish economic development, and reinforce the Solidarity union movement by making it "the only guarantor of public acceptance and support" for such an arrangement.
He stresses that any financial rescue package "must involve provisions for labor peace or the bankers won't go along." The Russians also would need to be involved.
"Poland needs roughly $3 billion over the next half- year. Of that, only $2 billion is likely to come from the West." observes Aspin. "This is partly because few bankers want to risk more than $2 billion and partly because leading bankers can be expected to demand Soviet participation as an earnest of Soviet backing."
Aspin believes that the Soviet Union can be induced to cooperate if it is made to understand that loans to all of Eastern Europe will be in jeopardy if it does not. If Poland does go into receivership, Aspin maintains, Moscow will face "the prospect of having to finance the hard currency needs of all the other states of Eastern Europe or watch the growth of unrest as their economies slide."
Western banking circles are expected to react cautiously to Aspin's proposal, particularly as Secretary of State Alexander M. Haig Jr. believes that the provision of credits or cash or economic assistance to Poland is not the answer to its problems. Only internal reform effected by Warsaw w ill solve the crisis , he contends.