In this article, I investigate the potential for reform within the European Union (EU). Spatial models are employed to explore the extent to which domestic considerations prevent the organization from intensifying cooperation among member states. I show that intergovernmentalism will ultimately remain the predominant decision-making mode despite recent introduction of the codecision procedure which yields unconditional blocking power to the European Parliament. The capacity for institutional innovation is limited because of the coexistence of intergovernmentalist and supranationalist agenda-setting procedures. This dualism offers opportunities to overturn legislative decisions. After experiencing a defeat in the domain of `low politics' governments may create `negative spillovers' by asking for compensation in the unanimity-ruled area of `high politics'.
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