Institutional limits of a 'Europe with the regions': EC state-aid control meets German federalism

Recent research on European integration has taken a fresh interest in the role of institutions in the policy process. Whereas much of the new institutionalist writing on the European Union (EU) has been very actor-centred, this article takes a more sociological approach that views institutions as the context in which actors are embedded. By shaping actors' expectations and giving legitimacy to certain groups, institutional context affects both policy process and outcomes. A case study of state-aid payments by Saxony to Volkswagen supports the hypothesis that, in order to explain tensions between the Commission and the German authorities in the state-aid field, one needs to complement actor-centred analysis by looking at broader incompatibilities between the institutional logics of Germany's co-operative federalism and centralized decision-making structures in the EU.