24 Nations OK Aid to Poland and Hungary

Foreign ministers of 24 of the world’s richest nations approved an economic aid package for Poland and Hungary on Wednesday, including just over $1 billion in grants and loans that will permit Poland to stabilize its economy and make its now largely worthless currency convertible on international foreign exchange markets.

The 24 nations also held out the prospect of similar support for East Germany, Czechoslovakia, Bulgaria and Yugoslavia if they follow the lead of Poland and Hungary to political and economic reforms.

Secretary of State James A. Baker III, presenting the U.S. position to the daylong meeting, said that aid from the rich nations will determine the ultimate success or failure of the experiment in democracy by countries ruled for more than four decades by entrenched Communist parties.

“After the streets empty of demonstrators, after the people select new leaders, after governments become the servants of the people, after all this--the economies must put food on the table and goods on the shelves of stores,” Baker said.

“New economic reform plans must break with 40 years of stagnation to unleash private market forces,” he added, according to a text made public by the State Department. “Here is where we can help, indeed must help, if we are to meet the call of history.”

The meeting of the foreign ministers of Australia, Austria, Belgium, Britain, Canada, Denmark, Finland, France, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United States and West Germany was the first official session of the organization to be known as the Group of 24. The members agreed to meet again before the end of next year.

Many of the aid projects discussed Wednesday had already been announced. But Frans Andriessen, the top foreign affairs expert of the 12-nation European Community and the chairman of the group, said that the meeting provided “a clear confirmation by all 24 participants of their solidarity with Poland and Hungary.”

Most of the emphasis was on programs for Poland. However, Andriessen said Hungary would also benefit from a number of programs aimed at opening the markets of the 24 nations to Hungarian products.

Twelve of the countries agreed to contribute to the stabilization fund for Poland. Although most of the contributions, including a $200-million grant from the United States, had been announced previously, enough new money was pledged to carry the fund $750,000 over its goal of $1 billion.

Andriessen also said the Group of 24 set a goal of a $1 billion in adjustment loans for Hungary.

Most of the money for Poland, $655,750,000, is in the form of loans. In addition to Washington’s $200 million, only Britain at $100 million, Canada at $25 million and Austria at $20 million promised money that will not have to be repaid. The U.S. contribution has already been appropriated by Congress.

Baker also announced that the United States will contribute $200 million of a $500-million “bridge loan” to tide the nation over until it obtains an expected $700-million loan from the International Monetary Fund. The bridge loan will be repaid when the IMF money arrives.

A senior U.S. official said Baker had urged the other countries to make their contributions to the stabilization fund as grants rather than loans because Poland is already so overburdened by foreign debt that the government has said it may be unable to repay it all even if the lenders agree to generously stretched-out repayment schedules.

But the official said the plan would still work as long as the new loans are long-term and low-interest.

The official said that “a big chunk--well over half” of the $1 billion will be in the hands of the Polish government by the end of this month, permitting Warsaw to begin an ambitious program of price and currency reform.

Baker said the grants and loans to Poland have assumed “symbolic importance for the Poles, an indicator of whether the West will in fact side with them as they make hard economic decisions.”

“A number of countries have successfully reduced inflation from high levels, others have worked off large foreign debt, decontrolled prices, sharply reduced subsidies or privatized state enterprises, but no country has solved all of those problems at once following 40 years of state planning,” Baker added. “The task is daunting, but our coordinated efforts will help the Poles help themselves over the hurdles ahead.”

The Group of 24’s decision to hold out the prospect of aid to East Germany, Czechoslovakia and Bulgaria--all members of the Soviet-led Warsaw Pact--followed a suggestion Baker made Tuesday in his West Berlin policy speech.

In addition, the group said that Yugoslavia, a Communist country independent of the East Bloc, could participate if it makes additional political reforms.

In Washington, White House Chief of Staff John H. Sununu also stressed the requirement that reforms take shape before U.S. aid can be granted. Speaking specifically about East Germany in a question-and-answer session after a speech at the National Press Club, Sununu said that such aid would be available only if East Germany meets the same sort of conditions that have been applied to assistance for Poland and Hungary.

“There was a significant lesson learned in the ‘70s when the Western allies sent billions and billions of dollars to Poland, for example, as aid, without any kind of conditionality or assistance on the technical side tied to it,” Sununu said.

“In East Germany, in Poland and in all the countries, this kind of internal change and reform is a critical first step before whatever assistance we send over there can help. I think that the Western allies understand that any assistance has to be tied to the kinds of requirements for change that will allow that assistance to bite,” he said.

Sununu said that the earliest Western financial assistance for East Germany would most likely come from West Germany.

“I believe the Western allies will review the kinds of internal changes that then take place in East Germany, and I think, only after that will you begin to see a significant effort on the part of either NATO, the NATO allies or the United States to craft a package analogous to the package that was put together for Poland,” he said.

Andriessen, the European Community foreign affairs expert, declined to spell out in detail the sort of reforms that the Group of 24 is looking for. He also said no decision has been made as to the level of aid for East Germany, Bulgaria, Czechoslovakia or Yugoslavia.

Asked if the Group of 24 could afford to broaden its effort, Andriessen said: “Don’t ask me now how deep the pockets are. I hope they are deep enough.”

Times staff writer James Gerstenzang, in Washington, also contributed to this report.