East-Bloc Reformers Pin Hopes on US

WELCOME MAT FOR BUSH

When Witold Trzeciakowski meets United States President George Bush this weekend, he will present him with a dramatic demand: $10 billion in aid. Mr. Trzeciakowski, Solidarity's chief economist, is a soft-spoken, practical man; certainly no dreamer. In his opinion, huge stakes warrant a huge Western investment. With such help, a democratic, capitalist Poland could emerge, he says. Without it, a totalitarian, communist Poland will slide into chaos, he warns.

``The West should not underestimate the danger,'' Trzeciakowski argues. ``We need urgent economic help to avoid an explosion.''

His apocalyptic statement underscores the stakes involved in President Bush's five-day visit to East Europe's two leading reformist nations - Poland and Hungary. Mr. Bush's hosts will not just welcome him with open arms. They will plead with him for action.

Both countries are navigating the tricky road from one-party totalitarian state to multi-party democracy; from an inefficient, centrally planned economy to an efficient, market-based one. A bold Bush initiative would reduce the potentially destabilizing effects of necessary austerity measures.

``The Bush visit offers an urgent opportunity, and let me stress the word urgent,'' says Victor Polgar of Hungary's Foreign Ministry. ``We need your support, both moral and monetary.''

A bold Bush initiative also would have an impact beyond Hungary and Poland, providing other Communist governments with clear evidence that they can get US assistance.

``If Bush does something dramatic, my government would have to take a second look,'' a Czechoslovak official says in private. ``If he does little, it will be easier for them to continue on their present [hard-line communist] path.''

East Europeans realize that the US, as the world's largest debtor nation, is unlikely to easily justify supplying billions of dollars in new foreign aid.

But Poles and Hungarians say American political leverage could prove crucial in reassuring Western private investors, helping procure aid from the International Monetary Fund and World Bank, and providing a psychological boost for a more active role by West Germany. Bush leaves Budapest on July 13 for the Paris economic summit, where he will discuss with major Western allies aid plans for Eastern Europe.

``If the Americans say it is OK, it will make it much easier for us,'' says a West German diplomat. ``We don't want to do anything alone in East Europe, because that leaves us open to all sorts of charges of selling out to the East.''

The Polish case, experts agree, holds top priority. Following Solidarity's sweep of last month's parliamentary elections, the country is on the verge of getting Eastern Europe's first noncommunist government in more than four decades. Bush's response to Trzeciakowski's proposal could help persuade the democratic opposition movement to take the plunge and form a government.

The Solidarity economist wants Poland to be ranked as a ``heavily indebted nation,'' a move that would make the country eligible for debt reduction from the group of Western nations.

Poland needs radical industrial restructuring, Trzeciakowski says. This requires closing down unprofitable, outdated heavy industries, which in the short run means falling living standards, high unemployment, and greater inequality of income. In exchange, Trzeciakowski wants the IMF and World Bank to offer a three-year package of loans and debt-conversion projects.

Under the plan, the new money would be spent by the Solidarity-dominated Senate, or now, perhaps by a Solidarity-appointed prime minister, thus avoiding the entrenched bureaucracy.

The Communist Party will not surrender its power lightly. So far, it has not endorsed the plan. Solidarity also is divided, with some members worried over the unemployment side effects.

``It's not going to be easy to jump from socialism to capitalism. It's never been done before,'' Trzeciakowski acknowledges. ``But if President Bush comes and offers us a helping hand, it would give us a strong push.''

Hungary's case is different, perhaps less pressing, but also potentially more promising. Unlike Poland, which is bankrupt, unable to keep up interest payments on its $40 billion debt, Hungary is solvent. It still can borrow money on the international market.

So Hungarian officials say they aren't looking for a handout. What they want instead is for Bush to encourage investment in their country. Two concrete measures top their agenda: ``most-favored nation'' (MFN) trading status and investment guarantees by the Overseas Private Investment Corporation (OPIC).

Until now, Hungary has received MFN status - which gives it special trade concessions - from Congress on an annual basis. It now wants the status for a five-year period to avoid the often-lengthy process.

``This is the type of moral support we need,'' says diplomat Polgar. ``The yearly process made people cautious; it didn't let them plan ahead, it doesn't give them the necessary confidence.''

As a US government agency, OPIC guarantees might provide an even more important boost. Offered on political grounds only to democratic countries with market economies, the guarantees give a government stamp of approval to private American investments.

``OPIC would help us more than a billion dollars in aid,'' says Imre Boros of the Hungarian Credit Bank. ``They would help raise more capital through investment and less by borrowing.''

Like Solidarity leaders in Poland, Hungarian opposition leaders caution Bush against making open-ended commitments to the ruling Communists. Both emphasize that any aid should be tied to moves toward more democracy and market economics.

``Help should be strictly controlled,'' says Gabor Demsky, a leader of the Hungarian Free Democrats. ``For example, Bush should insist that any new credits be invested in private enterprise.''

Surprisingly, some party members agree with this view. Reformers in Warsaw and Budapest realize that Bush is an important ally against hard-liners within their own parties

``Bush can assist the emergence of democratic socialism,'' says Janos Barabas, the new ideology chief of Hungary's Central Committee. ``He shouldn't assist any other type of socialism.''

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