Introduction

We are currently observing the final steps in the process toward forming the European Monetary Union (EMU). Hence, the next step is to create not only an economic but also a monetary union, toward which major progress has been made with fixed agreements about the next stages in the Maastricht Treaty. In order to enable the functioning of such a dual union, some (minimal) European federal union will be required. In this chapter some basic elements of a federal European constitution, like subsidiarity, federalism, and direct democratic institution are elaborated with the help of the constitutional economics. This chapter builds on a large literature of positive economics and tries to provide some normative suggestions. The authors think that while the proposals made may be controversial, the evidence found in the literature is, on balance, in their favor. In any case this article is meant to be thought provoking and should be discussed thoroughly.

In Section 2 six propositions, which should be key elements of a European constitution, are introduced. In Sections 3–5 an attempt is made to scientifically justify these propositions. The design of European legislation is discussed in Section 3, the subsidiarity and federalism principle in Section 4, and direct democratic institutions in Section 5. Finally Section 6 provides a summary and gives some conclusions.

Six Basic Elements of a Future European Federal Constitution

The completion of the European Internal Market provides the opportunity to achieve a number of efficiency gains when creating such a big economic unit.