Two-thirds of all Polish mortgage holders are facing skyrocketing payments with the collapse of the country's currency, the zloty, analysts say.

If the zloty continues to fall against the Swiss franc, economists say they fear a wave of mortgage defaults will sweep over Poland and deal a major setback to Europe's already-weakened banking system, The Washington Post reported Sunday.

The dilemma was caused in recent years when, as the zloty soared in value, millions of Poles bought property, cars and consumer goods with loans denominated in low-interest Swiss francs, even though few of the Poles had ever been to Switzerland or knew what a franc looked like, the newspaper said.

'Just like the subprime mortgages were a wonderful idea in the United States as long as house prices kept rising, so it was with the Swiss-franc loans here,' Witold Orlowski, a former adviser to the Polish president and now chief economist for PricewaterhouseCoopers in Warsaw, told the Post. 'It was seen as a win-win game. There were warnings, but basically people ignored them.'

Eastern European defaults on foreign-currency loans could devastate the balance sheets of Western European banks operating in the region, experts said.