Professor Paul De Grauwe is the John Paulson Chair in European Political Economy within the European Institute, established and endowed in 2011 through a £2.5 million gift from the Paulson Family Foundation, the charitable arm of the US-based investment management firm Paulson & Co founded by John Paulson.
Since his appointment in 2011, Professor de Grauwe has been looking into the crisis that has gripped the Eurozone, how it threatens the stability of the EU and the actions that politicians can take to ensure future stability. A former long-term member of the Belgian parliament, Professor De Grauwe influenced the European Central Bank (ECB) in its management of the major sovereign debt crisis that threatened to break up the Eurozone. His findings demonstrated that the ECB was the only institution that could prevent Eurozone countries from being pushed into the vicious circle of mounting debt he called a ‘bad equilibrium’, through acting as a lender of last resort in Eurozone government bond markets.
In September 2012, in a programme it called Outright Monetary Transactions, the ECB echoed Professor De Grauwe’s findings and committed itself to unlimited purchases of government bonds, with its President, Mario Draghi, invoking the ‘bad equilibrium’ terminology used by Professor De Grauwe. Chief economist of the Centre for European Reform, Simon Tilford, described Professor De Grauwe’s research as providing the ‘intellectual cover’ needed by the ECB to face down opponents of its activism in addressing the liquidity crisis.
Professor De Grauwe commented:
I am naturally pleased that my research was able to influence the ECB in its attempts to stabilise the Eurozone – research which of course remains hugely relevant, as it develops amid the pace of change within Europe. But equally I am enormously grateful to John Paulson for having the foresight and vision to enable such work, at an institution that leads in the advancement of social science research by bringing research based knowledge to bear on the most pressing global issues.