Historical Sketch

The Polish kingship was founded in the year 966 when the ruler Mieszko adopted Christianity. During the Middle Ages, the Polish-Lithuanian Union was dominating in eastern central Europe. A dynastic crisis in the early 18th century triggered the decline which culminated in three partitions after which Poland had been divided up between its neighbors Prussia, Austria, and Russia. The Prussian defeat against Napoleonic France led to the creation of the Duchy of Warsaw in personal union with Saxony, but the 1815 Congress of Vienna restored most of the pre-Napoleonic order. The Russian part was constituted as a Kingdom of Poland in personal union with Russia (so-called "Congress Poland"), and the city of Cracow got constituted as Free City. The Prussian and Austrian parts remained as they were. The relative Polish autonomy got was lost after the unsuccessful uprising of 1830 and the Cracovian independence was short-lived, as well, since it got absorbed by Austria in 1846. During World War I, Germany occupied Western Russia including Poland which remained a nominal kingdom and became the Polish Republic after the German defeat. The formerly Austrian and Prussian territories were annexed, except for Danzig (Gdańsk) which obtained a Free City status. In 1939, Germany occupied Poland again. The western parts were annexed while the east was left to the Soviet Union as a result of the Molotov–Ribbentrop Pact. Unoccupied central Poland became the so-called "General Government of the occupied Polish territories". After World War II, Poland was restored as a state. The territories under Soviet occupation were not recovered but, in return, Poland obtained parts of eastern Germany, including Danzig. During the Cold War, the People's Republic of Poland was part of the Soviet sphere of domination. In 1990, it reconstituted as Republic of Poland, and in 2004, it joined the European Union.

Monetary History Overview

In 1766, Poland revised its coinage system and decided to take over the Bavarian-Austrian standard of 1753, with the difference that the gold circulation almost made it a bimetallic currency. The 1st Polish Złoty (Guilder) had a fixed ratio to the "Convention Thaler" in silver and the golden Ducat. After the Polish partitions in the late 18th century the Polish coinage ceased to be produced. The short-lived Duchy of Warsaw issued coins in Saxonian standard. The recreated "Congress Poland" of 1815 resumed the minting. The forced integration into Russia after the failed Polish uprising of 1831 had also repercussions on the monetary system. In a first step of January 1833, the weight of the Złoty was slightly adjusted to fit into the Russian monetary system, resulting in a tiny weight change of less than 1%, and new coins were issued that had denominations in both Polish and Russian currencies. In January 1842, the transition ended, the Russian Ruble became the official currency, and the Polish coins were withdrawn until 1847. The Bank of Poland that had held an issuance privilege for paper money since 1830 continued issuing until end 1869.

During First World War, Germany occupied Russian territories in Poland and the Baltic States. The military authorities for the "Territory of the Supreme Commander for the East" (Gebiet des Oberbefehlshabers Ost) mandated the Credit Bank for the East (Darlehnskasse Ost) in Poznan, Poland, with the issuance of banknotes in German Reichsmark. The usage of the so-called "East Mark" (Ost-Mark) was restricted to the occupied territories, and the notes were not convertible. Banknotes were also issued in Ruble denominations at half a Reichsmark, referred to as "East Ruble" (Ost-Rubel). After independence in 1918, the new Polish government continued the occupation currency by creating the Polish Mark as transitional currency. In March 1919, the Russian, German and Austrian currencies circulating on Polish territories were exchanged within a week. Cash amounts above a threshold were confiscated as state loans. The peg to the Reichsmark was abolished in May 1919 to stay away from the German inflation. This only was partly successful since the Mark also underwent hyperinflation in the 1920, but to a much lower extent than the German currency. The 1919 currency act created the 2nd Polish Złoty as new national currency in the gold standard. But the post-war economic crisis allowed its implementation only in April 1924, when also the new central bank began operations. Initially the Złoty was equal to the Franc of the (former) Latin Monetary Union, but already in 1927, the nominal gold parity was cut by 42%. In 1936, the god peg was abandoned, and the Złoty pegged to the US Dollar. In September 1939, Germany and the Soviet Union occupied Poland and annexed the western and eastern parts, respectively. For the so-called "General Government of the occupied Polish territories", the German administration established the Issuing Bank for Poland in Cracow, which issued the occupation currency of the 3rd Polish Złoty (therefore also referred to as "Cracowian Złoty"), pegged to the Reichsmark. The pre-war banknotes were exchanged until May 1940. After liberation in late 1944, the Polish National Bank was reinstated in January 1945. The occupation currencies were withdrawn until end February and echanged into the 4th Polish Złoty. The "Cracowian" notes were redeemed only up to a threshold value, excess cash became worthless. The Złoty's official rate was the one of the pre-war currency, but inflation quickly reduced the market value to a few percent, so that in 1950, another currency reform had to be carried out. Two zeros were cut, and the 5th Polish Złoty became the new unit. Th currency was nominally defined in gold, but pegged to the Soviet Ruble and remained so until the end of the communist rule. In the late 1950s, the official exchange rate was complemented with effective rates for exchange with capitalistic countries. In 1982, the exchange policy was revised, and the floating effective rate became applicable to almost all transactions. This corresponded to a nominal 95% devaluation of the mostly inoperative official rate. The effective rate depreciated strongly during the 1980s, amounting to a more than 80% loss until 1988. The opening of the economy in 1989 caused a 95% hyperinflationary surge in that year alone, followed by continued depreciation in the subsequent years, however at a slower pace. In January 1995, a currency reform was carried out. Five zeros were cut, and the 6th Polish Złoty became the new unit. Depreciation continued for a couple of years, culminating in 1999 at 40% down. Since then, the Złoty has partly recovered and remained stable.

Poland joined the International Monetary Fund (IMF) on 10.01.1946, withdrew again on 14.03.1950, and re-joined on 12.06.1986.

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