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Because it could be quite complicated to look at the EU model from a point of classical democratic nation-state, it seems to be reasonable to discuss this problem, not by abstract reasoning, but by focusing on a concrete case. European Union is the best case available, which in recent decades has developed into a new type of political system with enormous consequences on democracy and governance in its member states. Despite repeated attempts for major institutional reforms, this system is likely to persist in its basic structures for the future and is unlikely to develop into a federal state or to disintegrate into a classic international organization. The present state of democracy and governance in the EU is therefore worth to be analyzed, as it is not a mere transitory state. In the following, we will first present a perspective of this political system, which by its choice of concepts and theoretical tools allows for an open view on possible tendencies and problems with respect to democracy and governance in the EU. In the third part, we discuss those features of the EU's political system, which are most important for an understanding of its present state and its prospective development. The fourth part presents two highly stylized, ideal-typical system models, each of which includes different mixtures and forms of democracy and governance. Both could be permanently stable but none of them can be reduced to the traditional forms of either „state“ or „international organization“. The final part consists of an overall assessment of the EU's possible development. The EU is a Dynamic Multi-level System. Not only in political science but also in legal science, sociology and economics basic concepts and theories rely on a traditional concept of the state. In this reasoning, there are national political systems which take the form of a universally competent state as a powerful central organ on the one hand and international relations taking place in the absence of central authority on the other hand; there is public law on the one hand and public international law or private international law governing the collisions of domestic legal systems on the other hand; there is national society as the level of social integration and world society as the level of system integration; there are national economies which allow for an intentionally created order on the one hand and the world market which is governed at best by “spontaneous order” on the other hand. If already by the choice of fundamental theoretical notions the member states on the one hand and the European Union on the other hand are considered as two separate political systems which are only linked by the Council of Ministers, changes in this system easily disappear from our view. As a consequence, analytical models of the integration process consider the question of whether it overcomes or strengthens the nation-states, as the most important issue of integration research (Morav?ík 1994). From this perspective, political discourse and actual European policy-making are often perceived as a dramatic fight between these two poles in which the respective players more or less succeed to push the reality of European integration in one of these two directions. This zero-sum logic misses the essence of the integration process and almost fifty years after the creation of the first European institution it makes less and less sense to understand and judge the European Union by reference to one of these two ideal models. One possibility to deal with the present state of the EU without loosing its particular features out of sight is to regard it as a “dynamic multi-level system” (Jachtenfuchs/Kohler-Koch 1996). “Dynamic” refers to the permanent process of institutional change, “multi-level system” indicates that the EU includes its member states in an encompassing system while at the same time, national political, economic or legal system continue to exist. The concept itself already indicates the existence of two distinct levels and the resulting implications. This concept directs indicates the dynamic character - the constantly changing division of competencies and the permanent state of institutional change within the system, which result in numerous tensions, communication problem and misunderstandings. If the European Union is regarded as a dynamic multi-level system from a governance perspective, it is possible to study key problems of the integration process from a more general point of view and at the same time regard the possibility that the EU has developed into a unique and new type of political system. In this sense, the EU is a political system and could be compared with other political systems and their solutions of the problem of a flexible and responsible governance. However it is necessary to highlight those properties indicating that the EU is neither a state nor an international organization and probably will not develop in either direction. Uneven Europeanization. By this term it is understood the fact that functional subsystems of society are europeanized to very different degrees and that the action capacity of actors on the European level and with regard to European affairs differs widely. This is not a new point of view, but it seems that the consequences of this trend for political responsibility and governance both within the member states and of the EU are not yet sufficiently discussed. The Europeanization of functional systems does not proceed in parallel to the Europeanization of the actors in these systems. Despite remaining deficits in the implementation of the “four freedoms” of the internal market, the Europeanization of the economy is the most advanced. As a result, economic transactions can take place in the entire EU without any significant difference to the domestic context. It does not mean that a homogeneous economic area with an even distribution of economic activity had emerged, that borders do not create additional transaction costs or that economic agents can act on the European scale independently of their seize. It means, however, that the possibility of capital owners to move freely in the entire EU constrains national governments in their economic policy. The Europeanization of the economy is made and institutionalized by a rapidly developing European economic law. Even if again there is no homogenous European legal space and probably there will never be one, the importance of the dynamics of European economic law for the restructuring of political relationships cannot be underestimated. Economic law is not a technical subject; and of interest only for specialized lawyers but is of utmost political importance even if it is not on the agenda of intergovernmental reform conferences (Joerges 1993, 1994, 1996). The analysis of European economic law is a striking illustration of the degree to which the Europeanization of the economy is not a “natural” process but was created by political actors and even more by allegedly apolitical experts. One major issue in this respect are the social consequences of economic integration caused and institutionalized by economic law. A second, and probably even more important issue is that collective welfare was increased by market enlargement and market liberalization and can so legitimate the disintegrative effects of economic integration. Contrary to the far-reaching Europeanization of the economy and the legal system, politics and society largely remain organized within nation-states. Despite a general and long-term trend towards conversion in the Western world, ambiguous as it may be (Kohler-Koch 1995; Therborn 1995), social cleavages, political culture, social structures and political identities are to a large extent national. European societies have many similar but few common problems. A large number of institutions emerged as the result of long and fierce fights over conflicting values that took place within nation states. Among these are party systems, democracy and the welfare state in their respective national versions. These institutions cannot be easily europeanized, because of this path-dependent development and the necessity to link them to a societal base. Political parties are the most well known example. High expectations of the emergence of a European party system on the occasion of the first direct elections of the European Parliament were largely disappointed. Even parties of the same ideological orientation but from different member states had great difficulties to agree even on minimal common programmatic guidelines. As their organizational and electoral basis remains within the member states, they follow the imperatives of the national political game instead of showing solidarity, and be it only programmatic solidarity, with a party in a different country. Thus, on a very general level the economy and economic law are largely europeanized in the European Union whereas politics and society but also constitutional law largely remains national. In particular large enterprises and parts of the political executive are able to act effectively on the European level whereas this is only to a much lesser degree the case for political parties, social movements, trade unions and to some degree interest groups. Because of the structural nature of this asymmetry, the EU will have to live with it for a considerable time to come. Permanent Institutional Change. In western societies, governance usually takes place in a rather stable institutional context. Both formal and informal institutions such as government, parliament, intermediary institutions, democracy, rule of law, the welfare state, as well as the relationship between rulers and ruled are more or less stable. This situation changes only in cases of intentional reform (e.g. federalization in Belgium) or in cases of severe system crises (e.g. Italy). The European Union on the other hand is characterized by a decade-long process of institutional change, which is both incremental and deep. This process of change does not only concern the institutions of the EU but also those of the member states. This transformation also concerns institutions in a broader sense, e.g. the particular national versions of the welfare state, democracy, rule of law and labor relations. Examples include the competencies of the German constitutional court, the central role of the British parliament and the financing of the Danish welfare state. The problem is not that the EU is abolishing these institutions. Eventually the intended or unintended pressure exerted by the integration process leads to modifications in these institutions. This does not have to be bad as such; it may also help to overcome long-established impasses and blockades of reform Transfer of authority to private or semi-public institutions on the European level is another element in this general process of institutional change. Depending on the political preferences of the respective government or on national traditions, governance by private or semi-public institutions can also be found in member-states. This tendency is favored by the structure of the EU, because it takes issues defined as technical ones out of the difficult process of consensus formation in the Council of Ministers. (Weiler 1994; Joerges/Neyer 1996). Further development leads to creations of “regulatory agencies”. Although the emergence of regulatory agencies is still in an embryonic stage compared to the United States, it is a clear example of how political decision-making bodies are relieved of complicated problems by expert bodies. Division in accompanies EU already from the beginning; the “Single” European Act consisted of three separate and distinct parts. The Maastricht Treaty officially partitioned the EU into three pillars, without counting the other sub-systems of the EU (Schengen or the European Monetary System). At present, it is doubtful whether conventional constitutions for a policy, even federal ones, are able to deal with such a degree of interdependent heterogeneity. It is also quite interesting how EU deals with the democracy and legitimacy issue. Democracy is understood as the institutionalization of a set of procedures for the control of governance that guarantees the participation of those who are governed in the adoption of collectively binding decisions. Legitimacy means a generalized degree of trust of the addressees of these decisions towards the political system (Majone 1994). Although all the member countries governmants are considered democratic and legitimate it does not necessary implies that models of democracy developed in the national context could be transferred to the European Union and that a political strategy based on such a transfer would lead to a more democratic EU and to an increase in its legitimacy. The necessity of democracy in the EU can be justified only through that each system of governance takes collectively binding decisions and thus at least potentially intervenes massively into the lives of people. For this reason, all have to have a voice in the system and a chance to change the course of events. This is very important for the highly decentralized system of the EU where decisions are frequently taken by unanimous decision and where capacities for implementation and sanctions are weak. In such a situation, democracy increases system stability and problem-solving efficiency. Of course, democracy requires a functioning political infrastructure that mediates between decision-makers and citizens. In the member states, this function is performed by political parties and by media-based public discourse. However, parties and the media belong to those institutions, which are most strongly linked to the historical development of the respective states. And so what is politically important and discussed controversially in one member state does not have to be so in any of the other. As a result, even a political debate in Germany as the biggest member state would not have much impact on the European scale. In sum, the EU is faced with a dilemma between efficiency and democracy. The political decision to create a European market requires political decision-making powers at the European level. Their democratic control, however, is hampered by structural problems of the Europeanization of democracy and its social preconditions. Which Type of Policy is then the best? Whereas the political debate focuses on whether the EU should or is likely to become either a federal state or an association of states, it seems that this conception of the EU's prospective development in terms of opposing alternatives misses the present state of the EU. The debate in particular should not restrict itself to comparing the sad reality of European democracy to the bright ideals of the democratic nation-state. At the same time, the argument that there is no real problem of democracy because democratic nation-states kept firm control over the integration process is not very convincing either. For this reason, there are two common theories of EU political organization models, which are not conceptually based on the image of the state. Two such models will be briefly presented here. In the first place, these models are provisional attempts to grasp the rapidly changing and confusing reality of governance in the EU. In addition, however, they are more than artificial models because they can be also found in the conceptions of political parties in some member states about a legitimate political order for the EU. The Economic Community model. Although EC model is strongly influenced by particular German ways of thinking about the relationship between politics, law and the economy that is mostly accepted only in Germany, its features can be combined to a model of the EU which is not linked to particular look at institutions and society. In fact, it shows how the political order for the EU could look like and is more or less shared by several political parties in Britain, France, and Germany throughout the history of the EU (Jachtenfuchs/Diez/Jung 1996). The most important feature of the model is the separation of the market and the state, the co-existence of a single European market together with a number of distinct states on the same territory without a degree of political control equivalent to the degree of economic integration. In the framework of this model, economic integration is not only a necessary reaction to the requirements of a natural process of economic globalization but also an explicit goal. Both economic efficiency and individual liberty are best served by the institutionalization of a market economy, which among other factors assures free competition, respect of private property and a strict anti-cartel legislation. This should not be confused with the one of a free and self-regulating market. Social and economic order has to be constituted by legal rights and must be protected against egoistic interests of market participants. Because only a particular type of market economy best balances economic efficiency and individual liberty, the number of allowed interventions into the market is limited. As the citizen has only economic rights and obligation on the EU level, and these are conferred upon him by a constitution embodying principles of an optimal economic organization, there is no need for democracy at the EU level. Legitimation of the economic community is achieved by efficiency and liberty (Mestmäcker 1999). There is thus a sharp division between politics which has to be subject to democratic control, but remains the exclusive to the member states and economics which is apolitical and thus beyond the need for democracy and has to be organized on the European level. This division is seen as a natural one based on the properties of the respective functional systems. The economic community should be institutionalized in a constitution as a constitution offers the best protection against opportunistic interests. This is particularly true for the European constitution (the EC Treaty), which can only be changed by unanimity and is thus even more immune to changes. Thus, in the ideal case, a societal order, which is considered to be ideal, is institutionalized in a form in which it is difficult to change it and its implementation is given to an organ that is not subject to any political control. Because of the separation of the economy from politics, internal and external security are tasks of the state and thus irrelevant for the EU. As the economic community is not a political one, it does not require whatever kind of collective identity and no symbolic integration. All in all, the separation of politics and the economy picks out a number of criteria for assessing the legitimacy and efficiency of the EU. Most important feature of the EC model is that it allows the co-existence of a European market together with national states and weaker European governance. Whether such institutional models would be sustainable in practice depends on solving the main problem of dividing economy and decisions powers. The Network Model. Territorial scope of the EC model does not apply to the network model, which is characterized by a multitude of institutions, participation channels and actors. Literature has uses the term “network” for capturing a particular type of social order. In contrast to the type of a “state” with the structuring principle of hierarchy and of a “market” with the structuring principle of anarchy, the particular feature of networks is the loose coupling of its components (Mayntz 1993). Network model neither has a fixed organizational structure nor a constant number or type of participants. In the political debate, green parties have mainly put the network as a model of political organization forward. This usage of the network model insists on the necessity to increase citizen participation in decision-making that is relevant to them and on the preservation of small-scale identities. The result is a bundle of different functional and territorial constituencies with overlapping and variable membership and without a clearly distinguishable center or geographical scope. It is based on the idea that the power of a unitary and hierarchical state with a center, which is usually far away from the real world and the citizens and prevents rather than furthers the development as a whole. As this problem cannot be dealt with be means democracy of majority in large and heterogeneous societies, this line of thinking stresses the need to grant far-reaching rights to people on the local and the regional level and with regard to those areas which are of direct relevance to them. This concept is often referred to under the label of a “Europe of the regions” (Diez 1996). The main political unit would thus be a region. Different regions would cooperate to different degrees and in varying ways in order to solve problems perceived to be common. In this view, political organization does not necessarily require a strong and powerful center but can as well work in such an open and fluid structure, using for example the opportunities provided by modern communication technology. Networks are mainly discussed with regard to their ability for governance (Sharp 1994). The open structure of networks suggests that legitimation cannot be achieved by classical means of democratic control because of lack of territorial unity of rulers and ruled. Theoretically it is possible to deal with this problem by creating a number of quasi-parliamentary bodies for particular problem fields. Their composition does not have to be determined by general elections but can follow other criteria, e.g. statistical representation or the representation of particular groups (Held 1995). The political proponents of the network model suggest that legitimation is mainly achieved by broad participation which Network model imposes. Problem is whether this is sufficient to assure the legitimacy of a European Union constructed as a network or whether such an EU would in fact exclude large and distinguishable groups from the political process. In a nutshell, pluralism as a way of governance and participation is a distinctive feature of the network model. State and societal actors of the most diverse kind participate in varying combinations in the decision making process. Another particular feature is the preservation of small-scale identities. Possible potential problem lies in organizing the number of organizations and decision-making bodies among themselves, as no clear structure is defined. Because Network model is the most innovative design of future EU with hardly any historical precedent, its contours are not very clear. However, ignoring the network type means ignoring a number of organizations and institutions existing in EU that already have marks or use the Network model. Perspectives for Policy Development will be influenced by three trends: uneven Europeanization, permanent institutional change and structural problems of democracy. The overall image gained by such a view is a political system in which the principle of territorially organized and responsible politics is at stake. The difference of this system with regard to the problems of internationalization and common dependence of most EU members stresses the fact the system is practically highly immune to change. From the two models discussed above, the economic community seems to reflect the present state of the integration process and its development options in the near future. This type also highlights the political problems caused by the integration process. The network model takes these features into account and tries to build an acceptable political order on this basis but overlooks the fundamental asymmetry between the European market and the national state. The European internal market is widely accepted in most political camps. In addition, it is not only institutionalized in a kind of economic constitution but also stabilized by particular interests in the EU. Democratic policy-making mainly takes place within the nation-state. Whether such an asymmetrical political order can become permanently legitimate in the eyes of citizens depends on how disintegrative effects of the integration process and relative deprivations are perceived and judged by the very people. The introduction of a common currency and eventual enlargement of the EU could be the decisive test for showing whether possible negative effects on individuals would be perceived as legitimate and appropriate. High economic and political turmoil that can appear after Euro or after inviting new countries into EU could lead to the formation of political movements against integration (within EU and also integration of new members), which can be stronger and more persistent than the ones that appeared during the referenda on the Maastricht Treaty. The perception of negative consequences of integration and the possible formation of political movements responding to this perception is, however, not directly linked to the real strength of such negative consequences but strongly shaped in the political discourse by political parties and the media. 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