The idea(l) of the ‘West’ has become a closed chapter of the post-(Cold) War era. The shared commitment to universal human rights, liberal democracy, and a rules-based international order, constructed from the ruins of fascism and world war, is fragmenting. Its political and economic centre—the United States—is turning inwards, undermining the principles of institutional independence, disengaging from multilateralism, and reassessing the political value of long-standing alliances. From a European perspective, the legacy of policy inertia and mistakes has amplified the effects from rising authoritarianism abroad and illiberal populism at home; this has left its democracies weakened, indebted, and divided. Within this fractured landscape, the European Union can no longer rely on American cover or the inertia of past achievements.
Political movements fuelled by anti-migration sentiment, demonising political opponents and/or ethnic, religious, or sexual minorities, have fed on the credibility crisis of democratic polities and the institutions that sustain open societies and social market economies. This erosion is compounded by the rising cost of servicing high and increasingly unsustainable levels of public debt. Ten advanced economies, including Italy, the US, and France, carry debt above 100 per cent of GDP. Many of the Western democracies thus find themselves on a collision course between the imperatives of fiscal consolidation and the unfulfillable demands of anxious electorates. It is this context, in which the EU and its member states are beginning to confront a sobering reality: they must now struggle for their security, independence, and prosperity against major powers that see the liberal order not as a legacy to preserve but as an obstacle to their own brand of raw power politics.
An EU forged by crises
In fact, that message defined this year’s State of the Union. ‘Europe is in a fight’—for peace, independence, values, democracy, and its very future. The message was as blunt as it was timely: the EU must look after itself if it is to ensure its industrial, technological, and energy sovereignty and defend and shape multilateral rules of mutual benefit. But ambition without capability will erode credibility abroad and exacerbate disillusionment at home. Europe’s Achilles heel is threefold, and it must focus on policies with which to overcome
Jean Monnet’s conviction (expressed in his 1976 Memoirs) that Europe would be ‘forged in crises’ is being tested again. Without institutional reform, the Union risks speaking the language of power while lacking the means to exercise it—an invitation to those preparing for a ‘new age of empire’.
Given the current fluidity in geopolitics, the EU’s window for reform is narrow. The US disengagement from multilateral trade leadership leaves open the possibility of a fractured global trading order. If Washington continues to abdicate its responsibilities, Europe must decide whether to lead coalitions that preserve high-standard trade rules or risk being drawn into protectionist blocs. The State of the Union highlighted efforts to secure ‘global rules through bilateral agreements’ by building coalitions of like-minded countries to reform the global trading system (in line with previously published recommendations made on these pages), with an explicit reference to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). As was argued therein, such coalitions would strengthen European supply chains, open new markets, reduce dependencies, and enhance economic security. However, the negotiation and ratification process of the EU-Mercosur trade agreement shows that even high-priority projects remain vulnerable to narrow domestic interests and national sensitivities.
Meanwhile, the countries of the Shanghai Cooperation Organisation (SCO), representing about 40 per cent of world population, are steadily developing their own payment, settlement, and depository infrastructures. These efforts aim at reducing dependence on Western-led financial systems to undermine the dominance of institutions such as SWIFT, established multilateral development banks, and international financial institutions. The recent Tianjin summit confirmed once more that the SCO is making progress in preparing energy corridors, new financial arrangements and development financing, establishing gradually a consolidated institutional ecosystem in Eurasia.
These parallel developments provide further evidence that Europe cannot simply improvise its geopolitical role. The combination of US disengagement, internal political, economic, and institutional constraints, alongside the emergence of an alternative institutional order centred on China and Russia, confirms the need for the EU to have robust fiscal tools and an effective institutional structure in order to address major issues such as trade, security, and climate change. Only with these can it project credibility abroad and resilience at home. However daunting and complex the political process may be, Europe must rise to the historic challenge of creating a continent that is resilient and in control of its own destiny. This is now both urgent and unavoidable.
Reform priorities
For internal reasons as well, the European Commission has only about four years to prepare, adopt, and implement an ambitious reform agenda before voters return to the polls in 2029. Failure would embolden the Eurosceptic far right, whose objectives align closely with ‘major powers … either ambivalent or openly hostile to Europe’ (State of the Union) and whose rise could paralyse further progress. That makes compromise essential: member states will have to accept reforms that may not perfectly serve their national interests but, collectively, determine the EU’s survival.
First, Europe needs fiscal firepower and a well-defined geofiscal approach. In today’s ‘unforgiving’ world, it must be able to coordinate and finance shared priorities—from defence interoperability to energy security, critical industrial projects, and digital independence. New sources of revenue at EU level, such as a tax on digital services, would also enable the Union to take out loans for emergency measures. This would allow Europe to take decisive action where national budgets alone are insufficient – naturally under strict supervision.
Second, the EU must strengthen sovereign resilience. The European Stability Mechanism should be scaled up into a genuine intra-European IMF, able to provide conditional liquidity to members under market stress. A binding fiscal protocol could grant temporary exemptions for investment in strategic priorities, while preventing destabilising austerity cycles. Insulating Europe’s collective strategy from domestic shocks would enhance resilience and protect legitimacy.
Third, speed matters. In a more hostile world, the EU cannot afford paralysis. Qualified majority voting should be extended to critical questions of trade and external policy, ending self-blockage. A strategic majority clause could allow coalitions of willing states to act on behalf of the EU in emergencies, while permitting opt-outs for those unwilling to participate. This would preserve unity without sacrificing relevance.
Fourth, Europe must seize trade leadership if the US continues to turn inward. As the State of the Union highlighted, an EU-led coalition for open trade could knit together ‘a coalition of like-minded countries’, harmonising rules and securing reciprocal access. Preserving an open trading system would enhance resilience and assert Europe’s role as a global rule-maker rather than a rule-taker.
Finally, the EU needs a clearer membership architecture. With 27 current members, nine candidate countries, three EFTA partners, and one former member state, it is time to move beyond ad hoc opt-outs. A layered system could offer three tracks: (i) a lighter European Economic Community focused on market integration (which would allow for a faster and more formal approximation process); (ii) full European Union membership with existing competencies; and (iii) a European Federation as politico-economic core of countries that agree to pool fiscal sovereignty, defence responsibilities, and external representation. This would replace the Europe à la carte approach and offer a structured model of variable geometry, reflecting Europe’s historical evolution from the EEC to EU. This would provide voters with more clarity and states with greater flexibility.
The State of the Union address has provided much of the accompanying narrative. What Europe now needs is structure: a credible fiscal base, faster decision-making, trade leadership, and a layered membership architecture that absorbs centrifugal forces rather than fuelling them. These are not technocratic luxuries but prerequisites for sovereignty in an unforgiving world. In this, the sequencing matters—quick wins could come from pilot projects within existing funds, an EU-led trade coalition, or extending qualified majority voting where treaty law permits. Medium-term momentum would require scaling up the Stability Mechanism and introducing EU-level resources, while treaty change will ultimately be needed to lock in deeper integration.
Europe no longer has the luxury of time. The EU has four years to turn assessment into action and action into institutions—or risk being sidelined in a world of rival power blocs. A credible fiscal base, faster decisions, and a layered but cohesive structure are not optional reforms; they underpin European sovereignty. Whether Europe seizes this moment will decide if it emerges as a global actor in its own right, able to be an active co-author in the drafting of the next chapter of the post-post Cold War era. The alternative would be political fragmentation and global irrelevance.
Jan-Peter Olters
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