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Garicano

There are 705 Members of the European Parliament, down from 751 since the UK left earlier this year.


Most people would be hard-pressed to name the 13 Irish ones much less any of those from other countries. Even since last year’s election there are two new ones; Chris McManus replacing Matt Carthy who was elected to the Dail in February and Colm Markey replacing Mairead McGuiness who has become an EU Commissioner.


One of the most interesting is a Spanish MEP called Luis Garicano who is in the same group as me, Renew Europe. As a side note, he learnt his excellent English attending summer schools in his teens in Dublin and he told me that he has very happy memories of his time with his host family in Finglas.


He went on to become a Professor of Economics in the London School of Economics (LSE), working there until 2019 before being tempted by the messy world of politics.


Back in 2008, the Queen of England agreed to open a new building at the LSE. In advance, Buckingham Palace asked that someone at the LSE would explain the financial crisis to the Queen. Luis got the job.


Having given his explanation on the day, she had just one question. “Why did no one see it coming?”


The clever people at LSE became obsessed with what became known from then on as ‘the Queen’s question’.


Earlier this year, as an MEP, Luis led the campaign to dramatically expand the EU budget to help with Covid recovery. It is great to have such experts to call on at such difficult times.


The plan was and is complex but we are now in the final stages of agreeing the final amount that will be made available to the EU for the period 2021 to 2027.


The EU budget can be quite a dry subject but it is different to an Irish budget in 4 main ways.


Unlike last week’s Irish budget, the EU plans for 7 year periods and the overall plan is called the Multi-annual Financial Framework (MFF). You might hear a lot about the MFF over the next few weeks. The Irish budget operates on a yearly basis.


Secondly, the EU budget is relatively tiny. It amounts to approximately 1% of EU GNP. That is compared to the Irish budget which stands at around 25% of GNP.


Thirdly, the EU cannot borrow money or run a deficit like Ireland can.


Finally, the EU budget is for the most part spent on just two programmes; the Common Agricultural Policy and Cohesion funding. The Irish budget of course covers almost every part of Irish life from the cradle to the grave.


So, in response to Covid, MEP Garicano and others came up with a plan for the EU to borrow large amounts of money for the very first time and to pay it back over a long period of time as far out as 2058. Of course, there were others thinking along the same lines but his expertise put him at the centre of the discussions.


The expanded budget would allow the EU to spend on relaunching the EU economy with an emphasis on digital innovation and the environment.


The plan become known as Europe’s ‘Hamilton moment’. Back in 1790, Alexander Hamilton became the US’s first Secretary of the Treasury. He is on the $20 note and is the subject of the smash hit Broadway musical ‘Hamilton’. His plan was to mutualise debt across the 13 states of the US. Despite the initial resistance of small-government Nationalists, he got his way and the Federal structure of the US began to emerge.


So where does this EU Hamilton moment take us?


Firstly, we will have vastly greater resources to help kick start EU economies as soon as Covid restrictions are lifted.


Secondly, we will have the opportunity to reshape the structure of the economy by investing in parts of the economy that will help us to achieve the Sustainable Development Goals and to become more competitive in the digital age.


Finally, borrowing could be here to stay. I mentioned that the EU budget is tiny. The US federal budget is about 12% of GNP. If the new plan for repaying the new borrowing can be seen to work over the next seven years, EU leaders will be emboldened to be more ambitious. This could lead to greater investment in the Horizon research programme and the Eramsus student exchange programme, to name just two.


So even if you didn’t learn anything from this, it will be the first time that you will have come across a mention of Finglas, Her Majesty Queen Elizabeth II and a Broadway musical in the same story.


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