NOW'S THE TIME for the industrial democracies to reduce Poland's enormous debts. The burden of the debts is interfering with Poland's transition to a market economy in the Western style, and it is emphatically in the West's interest that Poland succeed. Poland's commitment to reform is by far the most radical and courageous in any of the post-Communist countries, and it deserves a commensurate response from the creditors.

The subject came up at the recent meeting of the seven big industrial countries in New York, but it's unclear what -- if anything -- was the result. France's finance minister later said that they had agreed to forgive at least a third of Poland's debt. The U.S. Treasury responded that there was no agreement on a figure, but the United States would support one substantially larger than a third. That's good news. How about writing off 80 percent, as the Poles propose -- contingent, of course, on continued progress on Polish economic reform?

Poland's debt is now about $43 billion, and 80 percent of it is owed not to banks but directly to Western governments. They lent it in the 1970s to the Communist regime for a political purpose -- to draw Poland toward a consumer-oriented society. It would be a melancholy irony if those debts were now allowed to interfere with the much more drastic restructuring that a democratic Polish government is undertaking.

It's not enough merely to suspend repayments and to postpone interest charges. The Poles argue, correctly, that the very existence of the debts frightens off foreign investors by threatening financial turmoil at some unpredictable point in the future.

Debt reduction on the scale of 80 percent is much more than creditors have offered the Latin American debtor countries. Why treat Poland differently? First of all, the Latin debts are mainly owed to commercial banks, not governments. Beyond that, the restructuring to which Poland has pledged itself goes far beyond the reforms in any of the Latin countries except Mexico. But Mexico, despite its handicaps, is now able to attract investment. Unlike Poland, it does not have a long and increasingly porous border with a Soviet economy that seems to be sinking into chaos. It is crucial not to let Poland be sucked into that whirlpool.

If Poland prospers, it will draw other Eastern European countries along with it. If it fails, the example will be similarly influential, and Europe will remain divided -- this time along an economic border not much less dangerous or inhumane than the Iron Curtain.