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The bankers have a little leverage to pry some money out of Warsaw short of provoking an international default. They could delay signing an agreement that would stall the repayment of $2.4 billion in debt principal. That rescheduling agreement is badly wanted by the Poles. It would at least formally attest to their creditworthiness and help to reopen the door eventually to still more credit that Poland needs to get its economic system working again after a 19% drop in industrial production and martial law.
Private American banks hold only $1.7 billion of the Polish debt. While they extended credits easily to that country prior to 1976, they then stopped making loans when the Polish economy began turning sour in the late 1970s. The U.S. Government is owed another $1.9 billion. While all the American creditors are sticking to their story that the Poles will eventually pay up, Marine Midland Bank of Buffalo and Fidelity Bank of Philadelphia, among others, have classified the Polish loans in their books as "nonperforming assets." That means that the debtor is not now paying any interest on the loan, but that the bank still hopes eventually to be paid back.
West German banks, on the other hand, have lent Poland $4.5 billion, almost three times as much as the U.S., and other European banks are also heavy creditors to Warsaw. Washington officials blame Poland's current financial position squarely on the reckless policies of Europe's bankers during the late 1970s, when they sought to boost exports of their countries.
While the Polish debt to the West has received great attention in recent months, several East bloc countries face financial problems that are nearly as bad. Rumania, for example, owes $10 billion to Western banks and has been pleading for relief for months. Hungary, East Germany and Czechoslovakia have also been big borrowers in the West. The economies of those countries are sluggish at present, and all are having difficulty keeping up with their interest payments.
The present standoff between the bankers and the Poles could go on interminably. If its economy continues to function inefficiently and export earnings from coal and shipbuilding orders do not improve, Poland will be hard-pressed to pay just the $3.3 billion annual interest for 1982 on its debt. Eventually, the U.S., the greatest source of the world's capital, might have to come to the aid of the Poles. No one else, certainly not the Soviets or the Eastern bloc, has the $28 billion Poland will need. That, says Lazard Freres Partner Felix Rohatyn, puts the U.S. in its strongest position in relation to Communist countries since World War II. Meanwhile, no bankers or government officials are even thinking about complete repayment of the principal on the loans any time in this century. Billie Sol Estes would understand perfectly.
—By John S. DeMott.
Reported by Erik Amfitheatrof/Warsaw and Bruce van Voorst/New York