The Differentiation Paradox of European Integration: Why Going it Alone Produces Suboptimal Results1

Differentiation is not only a design feature of European integration, it is also a Member State strategy to overcome preference divergence. However, putting together an optimal group is difficult: Either the resulting club lacks the capacity to produce the club good efficiently; or differentiation attempts lead to an equally suboptimal outcome of a club too large and too heterogeneous to be effective. This paper develops an explanation of this differentiation paradox. When an avant‐garde group proposes differentiation, the presence or absence of its go‐it‐alone power determines the outcome. The former leads to suboptimally large clubs due to the bandwagoning dynamic that produces a cascade. By contrast, the absence of go‐it‐alone power triggers a blockade and results in suboptimally small clubs. This actor‐centred approach to differentiated integration is tested by analysing the establishment of Permanent Structured Co‐operation in security and defence, which declined from an ambitious idea into a diluted reality.