Democrats Ready East European Aid Bill : Congress: A proposed assistance package of $2 billion over three years is much higher than Administration requests.

In a direct challenge to President Bush, key Senate Democrats are drafting a three-year, $2-billion aid package for Eastern Europe that is far more than the Administration has requested for nations emerging from Soviet domination.

A proposal prepared by Democrats on the Senate Foreign Relations Committee would provide the lion’s share of the additional funds--$1.2 billion--for a European Bank for Reconstruction and Development now being formed by Western European countries.

In addition to Poland and Hungary, already targeted in a $738-million aid measure enacted last fall, the draft plan would authorize aid for Czechoslovakia, East Germany, Romania, Bulgaria and Yugoslavia. It allows the President to decide how the funds should be divided.

So far, Bush has asked only for $300 million in aid for a single year, starting Oct. 1, and has deferred a decision on whether to join the European Bank as a regular member. Under the Senate Democrats’ tentative proposal, however, the United States would contribute $400 million to become a bank member and also establish a special $800-million trust fund under Washington’s control to target assistance to Eastern Europe.

The draft, which could be voted upon by the committee within the next two weeks, reflects Democrats’ belief that the President has been too timid in extending a helping hand to the emerging nations and in establishing a foothold for American business firms in the region.

“As our military presence in Europe is reduced, the United States must greatly enhance its economic presence,” said Sen. Joseph R. Biden Jr. (D-Del.), chairman of a subcommittee on international economics and trade of the Foreign Relations panel. “Without presidential leadership, change will certainly occur in Europe, markets will be created, new businesses will prosper, but the United States could well be left out.”

The bank was proposed by France to finance public works and new private firms in the former state-run communist economies. The Administration has said it will take part in the bank only if it refuses to lend to private or public projects in the Soviet Union.

In discussing the draft bill, Biden said no funds would be provided directly to the Soviet government. But it would allow the President to allocate funds for private or government organizations to help promote democratic institutions in the Soviet Union, he added.

For example, he said, the President would be able to allocate funds to the AFL-CIO for helping to create more effective trade unions for Soviet workers, Biden said.

“This is a penetration program, not an aid program,” he said. “The goal is to penetrate the Soviet Union with American values.”

Under the Democrats’ tentative plan, the President would be authorized to appoint a director for American business initiative in the region, with ambassadorial rank, to promote U.S. firms’ interests.

The draft legislation also would create American business centers in former Soviet Bloc countries to help promote U.S. exports and investment.

A committee aide said the panel may include Bush’s request for $800 million in aid for Nicaragua and Panama in the legislation to step up aid to Eastern Europe. The funds for the Central American aid would be deducted from proposed defense spending, Bush has said.

While the draft bill does not say where the additional $2 billion for Eastern Europe will come from, Democratic sources said it would also be taken out of the Pentagon budget request.