Future of Europe in 2035: Balancing Act Between Progress and Oversight

The European Union (EU) is currently grappling with the question of centralization, particularly in the areas of industrial strategy, taxation, digital regulation, and climate policy. However, a shift towards greater centralization may lead to a decrease in global innovation and competitiveness, as argued by some experts.

This concern is rooted in the principle of subsidiarity, a cornerstone of the EU's governance structure that is enshrined in the Treaty on European Union (Maastricht Treaty). Subsidiarity is designed to preserve diversity, encourage local innovation, and prevent unnecessary centralization. According to this principle, higher levels of governance should intervene only when objectives cannot be sufficiently achieved at lower levels.

In practice, subsidiarity has often been sidelined, especially in recent years. However, revitalizing subsidiarity could offer a solution to the EU's current dilemma. By enabling member states, regions, and cities to design and implement policies that reflect their specific comparative advantages, administrative capabilities, and cultural conditions, the EU can foster an environment that encourages innovation and competitiveness.

This approach is already being seen in some member states. Germany, particularly Bavaria and North Rhine-Westphalia, and Austria have made significant strides in fostering an innovation-friendly environment for startups. Germany leads in startup formations and financing, while Austria is creating dedicated infrastructure and growth funds to retain value and jobs in startups.

However, a drift towards top-down uniformity undermines Europe's capacity for institutional diversity and localized experimentation. This uniformity can be seen in the EU's increasingly harmonized policies in areas such as taxation, digital regulation, and industrial policy.

A shift towards subsidiarity and decentralization could help the EU regain its competitiveness. By removing barriers rather than subsidizing outcomes, the EU can position itself as a framework provider, setting basic parameters and legal interoperability, while allowing jurisdictions to compete and innovate within those boundaries.

Subsidiarity also reinforces legitimacy as policies crafted closer to citizens are more likely to reflect local preferences, respond to feedback, and command public trust. When subsidiarity is respected, Europe can function as a laboratory of policy pluralism, with countries or regions testing novel approaches to taxation, labor law, startup regulation, or digital services, learning from each other's successes and failures.

In conclusion, revitalizing subsidiarity in the EU could be a key step towards boosting innovation and competitiveness. By allowing for localized experimentation and diversity, the EU can foster an environment that encourages innovation and competitiveness, while also reinforcing legitimacy and trust in its governance structures.