NEWS ANALYSIS : Poland’s Strict Budget Reflects Shift in Mood : Economics: Public and government are beginning to realize there’s no painless way out of the post-Communist doldrums.

After a lengthy flirtation with the temptations of populist economics, the Polish government has come back down to earth with a budget that meets the stringent demands of its international creditors.

The revised budget proposal, announced earlier this week but still not formally adopted by Parliament, holds to an austerity line in several key areas, most notably a pledge to keep a burgeoning government spending deficit within 5% of gross national product.

This demand was the unbending condition of the International Monetary Fund for giving its approval for further loans. IMF backing was also essential for further negotiations on debt relief from the London Club, a group of international private banks to which Poland owes about $11 billion of its $45-billion foreign debt.

While Prime Minister Jan Olszewski’s budget reflects the muscle of international lenders, it also reflects a deeper shift in the popular mood here. The new mood suggests that the general public has come to realize--despite the noise from populist politicians--that there is really no faster way to move the nation out of its post-Communist doldrums and into a Western-style economy.

In the aftermath of the confused elections in October, the weight of power in a highly fractured Parliament shifted to a center-right, nationalist-oriented bloc. This bloc owes its success to a campaign that focused criticism on a “shock-therapy” economic plan that caused a sharp rise in unemployment and proved deeply unsettling to the state-run manufacturing sector. Manufacturing still powers about two-thirds of the Polish economy.

But the shock-therapy plan also largely quenched runaway inflation, stocked once-bare retail shops with goods and triggered a massive explosion in small private business. Although it sent the state sector into deep recession, it also fueled a boom in construction, retailing and service sectors, which is still very much in evidence.

Olszewski’s government, incessantly plagued by its fractious populist coalition, at first proposed a plan that was widely criticized by Western economists--and liberals in the political Establishment--for policies that would have loosened the reins too much. Potentially, this could have triggered a return of hyper-inflation.

The populists joined in the plan’s rejection, saying it did not go far enough to relieve two years of austerity. The liberals pointed to the irony of a rightist government “proposing solutions from the past (Communist) era.”

It was amid this deadlock that the voices of the IMF, the World Bank and other Western economic advisers entered the picture decisively. At the same time, a broad spectrum of the Polish press also weighed in, arguing that, in the current conditions, no mythical “third way” existed that could create a “pain-free” economic transition.

A series of articles in Gazeta Wyborca, the leading newspaper, argued that most of the foot-dragging in Polish society had been coming from the former Communist Establishment--factory managers, state-industry bureaucrats and others. Their positions had once been secure in the Communist era, and now they either were resisting change or were incompetent to make it.

This group, the newspaper concluded, reflected the “Polish illness” in a “system of values that . . . killed initiative, taught that living according to imposed rules has a higher value than living at one’s own risk, which perhaps does not guarantee security but allows a person to test himself.”

The new system presents Poles with an array of choices, the newspaper said, among them the conflict between a low-paying job that requires little work and a high-paying job that demands new levels of energy. Most of the country, it suggested, is ready to go for the new opportunities, despite the sacrifices.

Although bitter arguments over economic policies are expected to rage for a month of debate in Parliament, the outcome is now seen as most likely to reflect that mood, already more evident in Olszewski’s trouble-prone government.

After running through one nominee for finance minister (who quit because he said the government’s plan was unworkable), Olszewski settled on the widely respected Andrzej Olechowski, who traveled to Washington last week to sell the revised plan to the IMF. The IMF gave its conditional approval.

Under the proposal, the government would halt virtually all remaining state subsidies, which have kept the prices of key products such as energy and medicine below the cost of production.

The plan mandates steep price increases for gas, coal, electricity and rent. It also increases taxes and slashes welfare payments for families and disability payments for invalids.

Olechowski, defending the social security cutbacks, pointed out that Poland has 2.5 million recipients of disability payments, the highest per capita in Europe. He also noted that welfare payments to families with children, under present regulations, continue until the “children” are 26 years old.

Olechowski called the cuts “profound but sensible.” He said the parliamentary vote on the budget, which may not come until May, would “determine whether 1992 turns out to be the last year of recession or the first year of financial crisis.”

Although the budget appeared to be a sharp change of course for Olszewski, he said he will push the plan through the Parliament with “iron determination.”

Olechowski said that because of Poland’s inconsistency, its “international credibility has deteriorated,” noting the IMF’s suspension of credits last year after the government overran agreed economic targets.

“The fact that our budget is deemed credible by the IMF is a very important factor that Parliament should take into consideration,” he said.