When a group of people or nations form an alliance, it is called a confederation, allowing each member to govern itself but agreeing to work together for common causes. Perhaps the best-known confederation was the South during the U.S. Civil War.
The noun confederation comes from the early 15th Century, meaning “an agreement.” Confederation is similar to the word "federation," but with important differences. Whereas a federation has a strong central government, a confederation is more of an agreement between separate bodies to cooperate with each other. The European alliance could be called a confederation, while the United States is a federation.