Fiscal federalism, subsidiarity and the EU budget review

Against the backdrop of the review of the EU budget currently in progress, this paper revisits the academic literature on multi-level public finance and analyses to what extent theory can inform the discussion on budget reform. The answer may seem dis-heartening, in so far as the exploration reveals that theory does not provide a conclusive roadmap for reform. However, the paper argues that Europe is facing hard political choices that must be based on a serious discussion of what we want the EU to be and to do.