Germany is traditionally big on European integration. And indeed European integration has gone much further than anyone would have expected, say, 30 years ago. In fact it has gone much further than most Europeans realize.
Right now I won't explain the political system of the European Union in any detail. But the system is generally regarded to have a lot less democratic legitimacy than the member states have. On the first try of pushing through the last iteration of the EU treaty it was called the constitution treaty. When it failed referenda in Ireland and France that name was shelved and we got basically the same thing with a new name. But that name gave rise to a symptomatic joke:
The American Constitution has 4 pages and begins "We, the people of the United States..."
The European Constitution has 4000 pages and begins "His majesty, the king of the Belgians..."
In theory, this is not a problem, because the constituent countries remain fully sovereign and the Union only exercises narrow delegated powers. But those powers turn out not to be that narrow in practice. The power to regulate the common marked, for example, is interpreted about as broadly as the American interstate commerce clause, i.e. it includes basically anything even vaguely related to any economic activity. So lots of new laws and particularly the most important ones nowadays come from Brussels rather than from Berlin.
So how much power can we delegate to Brussels without undermining popular sovereignty? In Germany the Federal Constitutional Court reserves the right to decide on that question. This power is particularly delicate, because, as you may remember, the principle of popular sovereignty is protected by the eternity clause. When the court let the last iteration of the treaty pass, the official reasons could basicall be summarized as "This is barely constitutional, because, if interpreted with proper restraint, it is the very limit of powers Germany can delegate to the Union." They were slightly more subtle, but that was the basic message.
Obviously, if we want to continue with the treaties' official goal of an "ever closer union" there are problems ahead. So what should we do about it?
Pessimistic as I am, I think there is a possibility of the problem being moot. There is a real chance of the present financial crisis doing European integration in. If that happens, we might end up with a slightly tuned up free trade agreement and the limits of delegation might be a question of counter-factual history.
But what if the European process survives? In that case I think it's the Union that must change. I'm uncomfortable with the Federal Constitutional Court making that kind of final judgments, but they have a point. The present process of European leaders piecementally removing fields of politics from the countries' constitutional processes and transfering them to a far less democratic bureaucracy can't legitimately be taken to its logical end.
Pretty soon we will have to give up on the ambivalence on where the Union is headed. If we want it to be a supranational cooperation it already has about as much power as is possible in that mode of existence. In that case we should declare victory on the project of a united Europe and realize the integration process is finished. If, on the other hand, we want it to be a federation, then that federation needs a real constitution of its own, deriving its authority from a European people yet to be founded. In that case we need an agreement on the relation between individual and national equality. I think the obvious solution is American style bicameralism. And then the new Federation needs institutions of its own, elected by the new people and independent of the national institutions.
The obvious problem is that the countries don't agree on where the Union is headed and definitely not on who would have how much representation in which organs of a federation if there should be one. So our politicians prefer waffling on. But that can't work much longer.