How can economic activities of local undertakings owned by public authorities be reconciled with the constraints arising form European as well as national law? German law as well as the European Charter of Local Self-Government guarantee municipalities the right to organise their own affairs independently. This includes their right to determine their internal organisational structures including the choice about their legal form. On the other hand European competition law does not discriminate in its treatment of public and private undertakings when it comes to the applicability of the provisions on state aid and public procurement. These rules limit the steering possibilities and the influence local authorities can assert on their undertakings. At the same time European law contains provisions to safeguard the spezial character of services of general (economic) interest. The thesis examines the interplay between the relevant provisions and analyses possible tensions.