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Cook potatoes in boiling water for 20 minutes o until tender. Drain, cool slightly and slice.
In a large skillet, cook bacon until crisp. Drain, reserving ¼ cup of bacon drippings. Return drippings to pan and brown onion in it. Add sugar, vinegar, ½ cup of water, salt and pepper to browned onions.
Dissolve cornstarch in remaining ¼ cup of water. Add to onion mixture and cook until mixture is clear and thickened. Stir 2 minutes more.
Pour hot mixture over sliced cooked potatoes. Add crumbled bacon and season to taste.
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