From remarks by Sen. Paul Simon (D-Ill.) in the Senate July 30:
Debt reduction is essential to Polish reconstruction. Without it, the road to Polish democracy and a free economy will be much more difficult. It clearly makes sense for the United States, which holds about $3 billion out of nearly $41 billion owed by the Poles -- 70 percent to governments -- to lead the way in the vital area.
It makes sense because we all know that the real value of Polish debt is much lower than the $3 billion face value. In trading on what are called secondary financial markets in the six-month period between September 1989 and April 1990, Poland's commercial bank debt fell from 40 cents on the dollar to 15 cents on the dollar. The officially held Polish debt is probably not worth much more than this, particularly because the prospects for Polish repayment are slim.
It also makes sense to reduce their debt for the multiplier effect this would have in the foreign assistance program begun by the Group of 24 advanced Western countries. . . .
There is a precedent for doing this. In addition to the president's debt-reduction program recently announced for Latin America, and the section 572 Program for forgiving debts to the poorest sub-Saharan African nations, there is the precedent of the London Accords of 1953. In a series of agreements, the victorious wartime allies reduced West Germany's foreign debt by 43 percent. The interest rates for certain debts were either eliminated or significantly reduced. It made good sense at that time to reduce Germany's debts, so that it could recover sufficiently from the war and more quickly rejoin the Western community of nations. And that is what needs to happen in Poland.