POLAND: THE QUEST FOR AID

Created: 12/8/1981

OCR scan of the original document, errors are possible

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SPECIAL ANALYSIS

POLANDi The Quest for Aid

Dmspits mams sncovraging miens that Poland will bm able to reschedule its debt*he country is in the midsteteriorating financial and eoonaerio situation.Production hamdropped sharply this year in nearly every sector, and gross. for Ml wii: fas near the level of the.

Poland's economic future depends onetween'the regime and Solidarity for power sharing and' continued economic assistance from theof current ad hoc Western eld arrangements could.-assist in paying debt service but willet flow of resourcss to help revive the economy. -This uggling act, moreover, still risks an eventual debt moratorium or default that could have serious consequences for some Western banks and Poland. '

J.he major' difficulty now is that Poland's major -sources of economic assistance all aoem unwilling to extend much new credit. West European governments are constrained by tight budgets, commercial banks are .unwilling to increase their exposure, and Moscow isough stand in negotiating trade

Poland'probably will need near-total reliefservice payments totalingand an additionalillion toillionin new loans. roadly coordinated programinvolving theestern governments thatnegotiating with Warsaw as well as privateofficial creditors not now participating in rogram could prevent anof benefits from Poland to"

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Soviet Role

- At leant tacit soviet cooperation la necessary toatched withdrawal of Soviet assistance that Moscow might well be tempted to try, given its own financial problems. Continued Soviet assistance at current levels, however, is in doubt. aemmmemmV

This year Moscow has provided substantial hard *help, rescheduled much of Poland's hardand--perhapsillion trade deficit. Moscow, however,threatening that it will insiat on balancednoxt year.

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Even if the Soviets relent somewhat, a' drop inis likely: This will put additional strainthe Polish economy and make it even moreWarsaw to meet its financial obligations to eaeaeeaasV *

if the Wast'toassive aidnd the Poles use that aid to beat

would have been assistedin the developmentstic society more akin to ones in. the West. Moreover,

the long-terra trend of Increasing political and economic

diversity among the USSR's allies would be reinforced.

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In the near term, however, the results of the current political.-negotiations'In Poland are ofimportance in any workable plan for national, .economicuch depends on whether the regime and Solidarity, can. arriveower-sharing arrangement ,and whether^Warsaw would accept austerity and use ncreased Western aid'.rationally to implementolicies. An accommodation between Solidarity and the government that permitted both decentralization and stoblization would facilitate economic recovery, increase the chances that Western creditors would be paid back, and improve the climateuccessful new Polish model" of Communism.

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