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The European Union as a federal system

Guide to the European Union (EU110)


  • the inter-state dimension of the EU
  • distribution of competences in the Union
  • the proto-sovereignty of the EU


EU101: Introduction to the European integration process.1


The European Union is often described as a polity sui generis, as being in a league of its own. The intention is to distinguish it from other forms of political organisation, in particular those of a confederation and a federation.

I partially agree with the use of the phrase “sui generis”, at least insofar as denoting the EU’s peculiarities. I do however maintain the view that this polity is as classifiable as any other. Exceptions to the rule are present in virtually every state. That is to be attributed to the unique historical and cultural conditions that contribute to the formation of the polity.

Rather than try to comprehend the EU in negative terms, as not being X or Y, I suggest we shift our attention to the items that do in fact instantiate it. We will proceed with this examination to forward our understanding of the Union’s decision-making structures, as well as the way in which authority is distributed among the various levels of government.

In the first seminar, we described European politics as “supranational”. The idea is that they occur outside the confines of the nation state. While that is true, it does not, in and of itself, offer a sufficient description. We are still missing a major characteristic of the EU: its inter-state nature, its inherent intergovernmentalism. By this we mean that European politics are founded on relations between nation states, while day-to-day affairs often are contingent upon negotiations between national governments.

The European Union is at once supranational and intergovernmental. Its legal-institutional order remains above the nation state though never in opposition to its normative achievements. In this sense, the supranational level is not a separate state, but rather one that extends the collective interests of its nations. This is even stated in Article 1 of the Treaty on European Union. It stipulates that the Member States establish the Union in order to attain objectives they have in common.2

The inter-state aspect of the EU level is formalised in two institutions: the European Council and the Council of the European Union. Though it is unfortunate that their names are similar enough to create confusion, these are two distinct entities, each with its own function as we discussed in our first seminar. What they both have in common is that they are platforms where national governments meet to deliberate on European policy. In the European Council those who represent the national level are the heads of state or government. In the Council of the EU it is the ministers dealing with the topic under consideration.

Given the role each of these institutions has, I wish to draw a certain qualification: we will suggest that the European Council is the entity that forms the rules, while the Council of the EU is the one that participates in the ordinary legislative procedure to make the rules. Just as a reminder, this distinction is necessary since the European Council has the unique characteristic of being the Union’s deciding executive, with the European Commission acting as the implementing executive.

The intergovernmentalism of the European Union also has a constitutional dimension. The EU institutions as such cannot amend the European Treaties, the primary law of the Union. Only national governments can do so by means of a common accord. This implies that the specifics of the supranational order are the end product of an intergovernmental agreement.

Yet the EU has a supranational dimension that clearly makes it something much more than a mere coalition of states. If we have a look at the outright supranational institutions, we will notice that their competences are clearly delineated while their authority allows them to adopt decisions that can be legally binding on the national governments.

Prime examples are the Court of Justice of the EU and the European Central Bank. The Court has ruled on several occasions in favour of the interests of the Union as such. Its interpretation of the Treaties has delivered such substantive principles as that of the “direct effect” of European law, or many of the elements that make up the European citizenship. The Court of Justice treats European law in its own right. It considers it separate from the constitutional traditions of the EU Member States, with whatever ramifications that may have.

As for the European Central Bank or else ECB, it clearly is the supreme monetary authority in the euro area. The National Central Banks of the states whose currency is the euro, can only contribute to the policies and agenda of the ECB. They cannot pursue their own programmes or anyhow contradict the supranational decisions on monetary policy. In recent times, the ECB has gained prudential powers on both a micro and macro scale. These are substantiated by two mechanisms that are essential to the nascent banking union: the one is the Single Supervisory Mechanism, the other is the Single Resolution Mechanism. With these in place the ECB has potential power over the entirety of the Economic and Monetary Union’s financial system.

However not all supranational institutions have such degree of control. The European Commission and the European Parliament are much more limited in their function. The Commission must always operate in accordance with the agenda of the European Council. It is there to make sure that the European Council’s rule formation is extended into concrete action, typically via the ordinary legislative procedure. In this sense, it is the assignee of the Member States. Additionally, the Commission does not have any power to raise its own funds, such as by imposing a Union-wide tax or by issuing its own debt instruments—those elusive “eurobonds”.

The European Parliament also partakes of those limitations. Since the EU cannot raise taxes, the Parliament has no right to legislate on the matter. For as long as the Union does not have its own fiscal capacity, the Parliament will not be able to have any say on the conduct of EU-level fiscal policy. The constraints that are unique to the European Parliament are two:

  • The first is that it has no right to initiate the legislative procedure. Only the Commission can do that and it will only do so if the European Council approves of—or otherwise forwards—such an agenda.
  • The second limitation is that it cannot have a major say on the European budget. That is so because the EU relies exclusively on contributions from the Member States. The decision on how the EU funds are distributed is, for the most part, an intergovernmental affair.

In more abstract terms, the authority of the supranational level is governed by three principles: those of conferral, subsidiarity, and proportionality. For our purposes we will consider them in outline.

The principle of conferral means that the Union can only have exclusive competence over areas of policy that have been explicitly conferred to it. One such area is competition policy or international trade. By “exclusive competence” we basically mean that EU decisions override any national law that may contradict them.

The principle of conferral also means that some areas of policy are designated as matters of shared competence between the EU and its Member States. Everything that relates to economic governance falls under this category. What it practically means to have shared competence is that no Member State can unilaterally pursue objectives that are not in line with a common legal framework established at the Union level.

Whatever is not conferred to the Union as either an exclusive or shared competence remains with the nation state. Prime examples are, at least in principle, the policies concerning security and defence.

To guide the application of the principle of conferral, policy-makers rely on the principles of subsidiarity and proportionality. These essentially determine which level of government is most appropriate for the matter at hand. Subsidiarity requires that decisions be taken at the lowest possible level, from the local community, to the national government, and then to the EU, with whatever permutations in between. Whereas proportionality is the idea that any shift of power upwards must always be proportional to the task. The supranational level should never have more authority than what is absolutely necessary.

All of these combined make it evident that the European Union is a complex political organisation. It has elements of a coalition of states and elements of a federation. Rather than arguing that the EU is not a “real” confederation or a “true” federal republic, I have come to the conclusion that it is best to employ the term federal system.

The complexity of the EU does not make it unique, certainly not among polities with multiple levels of government. Even unitary states, which are supposed to be “simple”, can have all sorts of peculiarities. As for the fact that Member States have a central role in European affairs, this can simply be treated as yet another emanation of federalism. Besides, the very essence of a federation is that it is designed to fit the needs of the states involved. For instance, the kind of federation that exists in Belgium is quite different from that of the United States of America or even from that of Russia.

Having employed the term “federalism”, I should note its polysemy in the context of European politics. It typically denotes a set of pro-european views on how to reform the EU and/or pursue further integration. Eurosceptics or opponents of the EU give it a derogatory meaning, as they generally associate it with creating a superstate or some other bugaboo. These significations notwithstanding, I here use “federalism” to describe a phenomenon of multi-level governance that unfolds against the backdrop of inter-state relations.

By noting that the EU is a federal system, I wish to bridge the gap in our understanding between the traditional notions of a confederation and a federation. Depending on the area policy, on whether the Union has exclusive, shared or no competence, the EU may appear as being closer to either of the two models. A holistic view though would make us think that it stands somewhere in the middle.

Though the “federal system” can be a plausible interpretation of the concept of “sui generis”, I advise against following that train of thought. By suggesting that the EU is in a league of its own, we are over-emphasing its particularities. Also, we are making it even more difficult for citizens to comprehend the overall architecture of the EU. No one knows what a “sui generis” polity is or implies, whereas everyone can relate to the notion of a federation.

As we will be discussing in greater detail over future seminars, the main reason I avoid employing the term “federal republic” is that I think that the EU has yet to develop the minimum necessary degree of sovereignty. What the Union now has is elements of sovereignty, a “proto-sovereignty” if you will.

This manifests over the areas of policy where the supranational level has exclusive competence. But it is mostly or totally absent from competences that either stand at the intersection of the supranational and the national levels, or remain with the nation state.3

Finally and to conclude with a normative proposition, we can only refer to the EU as “sovereign” only once its legal-institutional order is fully compatible with republican norms, in particular with the virtuous cycle of legitimation between the government and the citizens. For the time being, there still remains a lot of work to be done on that front.

We inquire into the state model of the EU in order to grasp how power is distributed across the system. And we do so because there exists an intimate connection between sovereignty and democracy.

  1. Introduction to the European integration process. Seminar published on March 5, 2016. [^]

  2. Treaty on European Union. The official consolidated version. [^]

  3. First thoughts on the European Border and Coast Guard Agency. Article published March 2, 2016. This offers a fair indication of why the EU cannot fully exercise sovereign authority even on matters of shared competence. [^]