Chapter 1 evaluates competing EU and member state claims over the constitutional boundaries of ‘constitutional identity’ and Kompetenz-Kompetenz in the European legal order, and identifies two constitutional boundaries of the EU legal order which will impinge on the selection of fiscal federalism models for the EU. The first is fiscal sovereignty. Member state fiscal sovereignty is a permanent constitutional constraint on the application of fiscal federalism theory in the EU. The Union can have no powers other than what the member states have given it, and nemo plus iuris, what the member states have given it is limited by their own ‘constitutional identities’ – of which fiscal sovereignty lies at the core. The second is comprised of the fundamental guiding principles of price stability and ‘fiscal discipline’ (sound public finances, and sustainable balance of payments) binding on the mandate for EMU itself under Article 119(3) TFEU.