The co-decision procedure, introduced in the Maastricht Treaty (Article 189b) and amended by the 1997 Treaty of Amsterdam, elevates the European Parliament as the locally elected body in the Union’s decision-making structure to equal legislative standing with the Council of Ministers. The 1986 SEA created the cooperation procedure in which the Parliament could accept, reject, or amend Council decisions. Under cooperation, however, rejected and amended decisions returned to the Council for final decision, and the Parliament had no further say in policy choice. At best the Parliament was an agenda-setter, but only if the Commission as the true agenda-setter acquiesced. Maastricht’s co-decision procedure now gives the Parliament joint say along with the Council of Ministers over the final specification of all EMU policies except monetary policy. Policies rejected or amended by Parliament but once again approved by Council, perhaps in another amended form, must now be agreed to by an absolute majority of Parliament. Disagreements between the Council of Ministers and Parliament are to be resolved through a Conciliation Committee composed of members from both bodies. Committee compromises return to their respective chambers, using a qualified majority in the Council and an absolute majority in the Parliament for final approval. The net effect of the codecision procedure has been to create two equally powerful legislative bodies, each capable of blocking the preferred outcomes of the other. Under Maastricht, negotiations between a broadly elected Parliament and a country appointed Council replace the non-elected Commission as the center locus for EMU policy-making. The EMU decision-making structure now closely resembles that of the United States: an institutionally weak executive, a state (country-specific) Senate and a district (local region-specific) House. It is the constitutional form of democratic federalism.

After Maastricht
The EMU stand at a crossroads. Having put in place the political institutions of democratic federalism — broadly representative legislatures governed by majority rule — two constitutional decisions remain to be decided. Which countries will participate in the new Union, and what policies will become the responsibility of this new EMU central government. How these remaining constitutional decisions are resolved is likely to have significant consequences for the eventual economic performance of the new Union. A large Union with significant EMU fiscal policy responsibilities runs the risk of replicating current U.S. policy performance and its associated fiscal inefficiencies following from norm of deference budgeting (Inman 1988 and Inman and Fitts 1990). A small Union with EMU policy assignments limited to monetary policy and the regulation of the internal market has the potential to maintain current economic gains (Emerson et al. 1988) and to encourage new, welfare-improving cross-national agreements where appropriate (Dewatripont et al. 1996). Which path will be chosen, and in the end provide the true meaning of subsidiarity for the European Monetary Union, remains to be seen.