Institutional Arrangements for Coordination Among Governments in Germany

The theory of fiscal federalism makes a strong case for decentralizing government functions in order to enhance the efficiency of allocating public goods where preferences differ among regions. Decentralized collective decision making fosters social and political cohesion at the level of the nation state by protecting minorities, by strengthening the accountability of politicians, and by mobilizing citizens through greater participation at the local level. Federalism respects different cultural and individual traditions among regions, and it emphasizes local diversity. Federalism thus reflects the regional dimension of democracy. However, decentralized government raises severe coordination problems. Coordination of public agencies within government—among the Executive, the Legislative, the Judicature, and the Administration—is difficult enough, yet it is further complicated in a multi-layer government framework where different authorities interact—governments and parliaments that are more or less autonomous and accountable to their respective constituencies. This may call for specific institutional provisions and rules for policy coordination and for dealing with conflicts between the levels of government. The focus of this paper is on the mechanisms of coordination as established in the Federal Republic of Germany (FRG) with its specific tradition of “cooperative federalism”.