State Aid Policy, Territoriality and Federalism: EU Scrutiny and Control of Regional Aid and the Supranationalisation of Subnational Autonomy in Federal Member States

Abstract

Whilst its impact on national industrial policy has attracted considerable attention in the scholarly literature, the implications of EU state aid policy on regional development policy and its effects on territorial relations inside EU member states have been largely neglected. Drawing on the experience of Bavaria, Flanders and Upper Austria, this article shows how EU action has imposed increasingly wide reaching and detailed constraints on subnational authorities, undermining and eroding their capacity to define and implement regional policy. It thereby also challenges the widely held presumption in the EU literature, as for example by proponents of multi-level governance, that European integration works invariably to empower and strengthen regions in Europe. To the contrary, the case studies show that the autonomy of subnational states in EU member countries with federal systems has been eroded as they have been forced to abandon traditional policies and practices. More generally, the article invites reconsideration of the relationship between European integration and subnational authorities.