Stabilization - Grabski elected prime minister on December 19, 1923, extraordinary prerogatives of issuing government decrees
- budget reform initially based on property tax (legislation Aug. 1923) and adequate adjustments of tax value (Dec. 1923), later new tax increases, new real estate tax, plans of future sale of part of government property & new tax monopolies; expenditure adjustment – decrease of railway subsidies, job cuts in administration, simultaneously unification of fiscal system in all 3 former partitions, 1924 Budget Act assumed 10% deficit to be financed by bond issue or foreign credit
- currency reform – money exchange intervention of PKKP on prime minister’s call (Jan. 1924) stopping depreciation of the mark, simultaneously organization of Bank of Poland as joint-stock private bank, independent from government; after successful subscription of BoP shares, start of activity on April 1, 1924 and issue of złoty as new currency on parity with swiss franc, złoty/$ exchange rate 5.18 zł/USD; Polish mark conversion rate 1:1 800 000
- consolidation of state-owned commercial banks, creation of Bank of Domestic Economy (Bank Gospodarstwa Krajowego, BGK) – May 1924
- 1925 Polish-German tariff war, BoP suspends złoty’s convertibility – July 1925, banking crisis in Poland – Sep. 1925, stopped by government’s newly created Fund for Assistance to Credit Institutions; almost 50% drop in złoty’s external value; BoP chairman Stanisław Karpiński denies intervention to Grabski, Grabski’s dismissal (Nov. 13, 1925)
Second stabilization - new government of Aleksander Skrzyński (paradoxically supported by rivalring Socialists and National Democracy, no peasant parties), Jerzy Zdziechowski (ND) – treasury minister
- Zdziechowski’s policy based on Gustav Cassel’s idea of exchange rate as relation between price levels of trading partners’ economies, so depreciation could be maintained until external balance was restored
- budget reforms – temporary salary cuts in administration, export duties on agricultural products (anti-peasant move in fact)
- improvement of business climate – ca. Feb. 1926, change of foreign capitalists attitude towards Polish economy, closing ties with USA – search for stabilization credits
- fall of Skrzyński, recreation of highly unpopular coalition of ND with Polish Peasants Party ”Piast”, Piłsudski’s May 1926 coup – beginning of authoritarian system of government
- first years of authoritarianism (1926-1929) – good business conditions (ended by transmission of American crisis to Europe), helping to raise public support for Piłsudski; period of intense state investment activity (sea port in Gdynia, Silesia-Gdynia railway, nitrate-fertiliser plant near Tarnów – Eugeniusz Kwiatkowski as minister of industry & commerce 1926-1930) and rise of importance of statist modernizers in the ruling elite
- Anglo-American stabilization credit October 1927 used for change convertibility standard (close to Gold Bullion Standard), not for increase of money in circulation
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