Present Situation
The European Union (EU) is not de jure a federation but various academics have argued that it contains some federal characteristics.
Here is the view of Professor R. Daniel Kelemen (Rutgers University) on how various brands of scholars approach the issue:
Unencumbered by the prejudice that the EU is sui generis and incomparable, federalism scholars now regularly treat the EU as a case in their comparative studies (Friedman-Goldstein, 2001; Fillippov, Ordeshook, Shevtsova, 2004; Roden, 2005; Bednar, 2006). For the purposes of the present analysis, the EU has the necessary minimal attributes of a federal system and crucially the EU is riven with many of the same tensions that afflict federal systems.
According to Joseph H. H. Weiler, "Europe has charted its own brand of constitutional federalism". Jean-Michel Josselin and Alain Marciano see the European Court of Justice as being a primary force behind building a federal legal order in the Union with Josselin stating that "A complete shift from a confederation to a federation would have required to straightforwardly replace the principality of the member states vis-à-vis the Union by that of the European citizens. ... As a consequence, both confederate and federate features coexist in the judicial landscape."
According to Thomas Risse and Tanja A. Börzel, "The EU only lacks two significant features of a federation. First, the Member States remain the 'masters' of the treaties, i.e., they have the exclusive power to amend or change the constitutive treaties of the EU. Second, the EU lacks a real 'tax and spend' capacity, in other words, there is no fiscal federalism."
Other academics have argued that the EU is unlikely to evolve into a unified federal state. Kelemen (together with Andy Tarrant) has taken this view himself, arguing that limits placed on the bureaucratic capacity of the European institutions - such as the relatively small size of the European Commission - form a barrier to the creation of a federal European state. In their words: "widespread political opposition to the creation of anything approximating a large, unified executive bureaucracy in Brussels has long-since ended hopes, for the few who harboured them, of creating a European superstate." Some common points in this context are that the European budget is very small and does not finance a lot of the economic activity of the European Union; that each member state of the European Union has its own foreign relations and has its own military if it so desires; that it is often the case that European Union member states decide to opt out of agreements which they oppose; and that member states still retain sovereignty over a large number of areas which might be expected to be transferred to a federal authority under a federal system. One important fact is that treaties must be agreed by all member states even if a particular treaty has support among the vast majority of the population of the European Union. Member states may also want legally binding guarantees that a particular treaty will not affect a nation's position on certain issues.
Use of the word 'federal' is itself the cause of some disagreement. Valéry Giscard d'Estaing found opposition from the United Kingdom towards including the word "federal" in the European Constitution, and hence replaced the word with "Community".
Read more about this topic: Federal Europe
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