Federalism is fundamental for the preservation of the cultural, linguistic and political diversity of European countries and peoples. The independence of member countries in these areas can thus be preserved (confederation).
In contrast, the basic principle of a centralized state is the unification of its member countries under the central government (incl. federation).
The subsidiarity principle dictates that at the European level only be regulated what is absolutely necessary (also in the context of globalization), but not what member countries and their regions can do themselves as well or even better and often more effectively than "Brussels" to protect their minorities, their cultural and linguistic peculiarities and their historically grown structures and forms of government.
In a more directly democratic Europe close to its citizens, the citizens – and not the politicians - would have the first word (e.g. with a constitutional initiative) and also the final word (e.g. with a legislativ referendum) on all important political issues.
This does not mean that in such a Europe government and parliament would have nothing to say any more; but they would be forced to work – much more than now – with and for the people. They would not only be constantly supervised by their citizens, but also sanctioned in referenda, if and when necessary, and this not only once every five years when the EU parliament is elected. Those who represent the citizens would have to really represent these citizens and to keep the promises made in the election campaign. The parliamentary (or representative) democracy would be much more representative.
Direct democracy (especially because of possible 51% against 49% votes) has to be adjusted and minorities
have to be constitutionally protected to avoid a dictatorship of the majority: The majority grants more rights to the minority, than it claims for itself. Direct democracy therefore is supplemented and tempered by subsidiarity and some important elements of representative democracy and thus becomes a semi-direct democracy:
(1) Government and parliament (and not the initiators!) are legally bound to assess all the popular initiatives, to express their view in the referendum campaign and to implement the people's decision.
(2) Proportional elections guarantee that minorities are represented relative to their strength in parliament and in the government, so that parliament and government assess the popular initiatives in a balanced way prior to the referendum and that an inevitably often-undifferentiated yes or no decision in a referendum is implemented cautiously, involving the minorities.
(3) In a bicameral parliament, a small country has the same weight in the senate (chamber of states) as a big one
(4) A quorum, that has to be achieved for a popular referendum to be adopted, prevents 51% to 49% decisions.
(5) In a referendum requiring the double majority (of both voters and of states), a citizen of a small country has a bigger weight than a citizen of a big country.
(6) A Constitutional Court may cancel a referendum or a decision of parliament (under certain conditions).
In the European Union, of course, everybody, in principle, wants more democracy and subsidiarity: EU politicians, authorities and elites time and again declare to be in favour of more citizens' participation and subsidiarity. At the same time, these very people ask for more centralisation and competences for "Brussels"; and they are decisively against European referenda, claiming that the decisions to be taken are too complex for the voters; but in reality probably also because they might not like the citizens' verdict.
1. Democracy (cf. Wikipedia)
From the Greek "rule of the people": A form of government in which eligible citizens may participate equally - either directly by voting for the passing/rejecting of laws or running for office themselves (direct democracy) or indirectly through elected representatives (indirect or representative democracy) - in the proposal, development and establishment of the laws by which their society is run. Or more simply:
Max Frisch: "Democracy means to interfere in one's own affairs".
Johann Wolfgang von Goethe: The best Government is the one "that teaches us to govern us ourselves".
(cf. The Free Dictionary): A union of states under a central government (federation) distinct from that of the separate states, who retain certain individual powers under the central government (confederation).
(Wikipedia): Principle of social organizations, which holds that problems should be dealt with at the most immediate (or local) level consistent with their solution.
A central authority should have a subsidiary (that is, a supporting, rather than a subordinate) function, performing only those tasks, which cannot be performed effectively at a more immediate or local level. The responsibility lies with the smallest entity capable to solve the problems.
Art. 5.3 of the Treaty on the EU:
"Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level."