ABSTRACT
This chapter provides an economic rationale for further discussions in the European Convention. At its meeting in Laeken in December 2001, the European Council convened a convention on the future of the European Union (EU). The chapter provides a reference system - based on the theory of fiscal federalism - for an economically optimal allocation of competencies within a supranational body like the EU. It proposes an allocation of economic competencies that can serve as an overall guideline for the discussion on establishing an European constitution. From a normative economic viewpoint, there is almost no contradiction between deepening and widening of an integration area. In addition, the deepening of integration goes hand in hand with a transfer of certain economic competencies from the national to the supranational level. As a general rule, the strong economic principle of subsidiarity recommends that economic competencies should be transferred to the lowest possible government body.
