Club-in-the-club: Reform under unanimity

► In our theory, stronger members of a club may threaten to form an internal club. ► The threat to form an inner club disciplines less efficient members and increase organization-wide reform effort. ► The threat of inner club may lead to more integration, but when it is executed, it leads to less integration. ► Majority rules prevent inner club to form and help avoid disintegration. ► We suggest implications for the leading application, the formation of the Euro zone after Maastricht.