Managing subsidiarity from an economic point of view: Soft co-ordination and hard rules in European economic policy

On the European level, a variety of different coordination mechanisms are used in different areas of economic policy. The spectrum ranges from complete centralization as in the case of monetary policy to weak forms of coordination like the so-called open coordination in social policy fields. The paper argues that this picture has to be completed by considering market coordination as a hard form of coordination. Then it analyses the necessary elements to decide on the allocation of powers between Brussels and the member states. First, a society need to decide what should be organised collectively. This is answered quiet differently by the member states of the European Union and thus needs to be taken into consideration especially when asking what powers the European Union should have. The theory of fiscal federalism developed criteria on whether the provision of a public good should be centralized or decentralized. These criteria provide a framework for evaluating the competences at the European level but have to be completed by analyzing the own interests of the different institutions within the European Union.