WARSAW, JAN. 23 -- The seven major industrialized countries reportedly have offered to cancel at least one-third of Poland's foreign debt, but Polish officials, pointing to the fragility of the free-market transformation here, insist that this is not enough to revive the economy and guarantee the stability of the post-Communist government.
"It is crucial for the democratic world to see that the end of communism in this part of the world turns into a success of democracy. Right now, in view of the uncertainty in the Soviet Union, that is a big question mark," said Stefan Kawalec, general director at the Ministry of Finance.
Warsaw is seeking an 80 percent debt cancellation, and Poland's chief debt negotiator, Janusz Sawicki, will travel to Washington this week to argue the point with the Bush administration.
To an increasing degree, the Polish debt argument with rich Western countries is cast in East-West strategic terms. Leaders here maintain that Poland, the largest country in Eastern Europe and one with a 600-mile land border with the Soviet Union, is an ally worth helping -- especially as political chaos spreads to the East.
In Paris on Tuesday, the French minister of economy and finance, Pierre Beregovoy, said in a news conference that the seven industrialized countries had agreed in a New York meeting to forgive Poland's public debt "by at least 33 percent." He said Egypt also would qualify for similar debt forgiveness.
Since the peaceful overthrow of communism here in 1989, Poland has negotiated exceptionally generous rescheduling of its debt. Last year, it paid almost nothing on the 73 percent of its $43 billion debt that is owed to Western governments. The debt was rolled over and it grew by about $5 billion.
But the Warsaw government, citing its record as the most aggressive and consistent free-market reformer in Eastern Europe, says it deserves more than rollovers.
"We cannot continue to make an extremely difficult transformation while being burdened with debt," Leszek Balcerowicz, finance minister and architect of the country's "shock therapy" economic program, said in an interview. "This debt does not create a good investment climate. It creates uncertainty."
Balcerowicz said that the "debt overhang" scares off potential foreign investors and prevents Poland from taking advantage of much of the $13 billion in Western credits that have been made available here for industrial restructuring.
"It is a paradox. What is offered with one hand cannot be used because of the investment climate," Balcerowicz said. "The investors who have come to Poland are mostly small and their quality is not impressive."
The minister of ownership changes, Janusz Lewandowski, said last week that only $10 million in private foreign investment had come into Poland in 1990. He described the figure as "very disappointing ... just a cosmetic inflow that means nothing."
Polish officials look enviously at the large investments being made in the former East Germany by German government and industry. A United Nations study says that German investment in East Germany in 1990 totaled about $35 billion -- more than double the combined foreign investment in all of Eastern Europe.
"When you look at the problems that East Germany still has you can see how it is difficult to make the transition to a market economy even with a huge inflow of capital," said Kawalec at the ministry of finance. "We cannot expect such an inflow of capital, but what we would like to avoid is a huge outflow."
So far, Poland's economic reform efforts have registered important successes.
Its hard-currency export earnings soared last year by 42 percent to a record $10.8 billion. At the same time, it managed to make its currency convertible, stop hyper-inflation, end chronic consumer shortages and build a $5 billion hard-currency reserve.
There was a social cost to "shock therapy," however. Unemployment grew to more than 1 million, and the cost of food and fuel soared.
But there is evidence that the pain of free-market change has been exaggerated by the government's inability to gather accurate economic statistics on the economy's one vibrant sector -- private business.
A widely publicized government statistic saying that the average Pole's buying power fell by 30 percent last year is wrong, according to Balcerowicz. He said that the decline was closer to 12 percent and that it was compensated for by an unprecedented increase in the "quality and variety" of consumer goods.
"I'm not saying we did not experience a decline, but it is overstated," Balcerowicz said. "There was an explosion of growth that escaped the statistics."
The coming year, however, is likely to be less vibrant for export growth. The January switch to hard currency in the Comecon trading bloc is expected to reduce Polish exports to the Soviet Union by 50 percent. In addition, the higher cost and limited supply of Soviet oil is expected to drain Poland's hard-currency reserves.