Europe must choose: reform and resilience − or drift into irrelevance

The EU headquarters in Brussels. The next round of reforms must secure not just prosperity, but sovereignty. EPA

Donald Trump has been called many things but his newest label – the great unifier of Europe – might just stick. That provocative notion may raise eyebrows in Brussels, Paris, or Berlin, but Mr Trump’s return could be the shock that finally compels Europe to do what it has long known it must: to become more self-reliant.

The world has changed. Russia’s war in Ukraine shattered the illusion of permanent peace in the region. China’s economic ascendancy is reshaping global competition. And now, with Mr Trump launching a trade offensive against allies and adversaries alike, one truth is impossible to ignore: no one is coming to Europe’s rescue.

For too long, Europe has assumed that peace, prosperity and US protection were permanent. That illusion is gone.

Mr Trump’s transactional approach to alliances – where strength is rewarded and weakness punished – has exposed a hard truth: Europe can no longer outsource its defence. His worldview owes more to 19th-century protectionism than 20th-century idealism.

But the implications extend beyond defence. Mr Trump’s America is not merely retreating from global leadership – it is actively dismantling the postwar order that enabled Europe’s rise. Nato, the World Trade Organisation, the International Monetary Fund – these institutions anchored European prosperity and security. That architecture may not include Europe by default next time.

Unless Europe steps up, it risks being left behind. Europe faces a choice: reform and lead or stagnate and drift.

The first path begins with taking responsibility for its own defence. That demands more than budget increases, with Germany poised to channel as much as €1 trillion ($1.15 trillion) into defence and infrastructure under Chancellor Friedrich Merz. It means aligning strategic priorities, co-ordinating procurement, and deepening military integration – ideally through a “coalition of the willing”, rather than waiting for unanimity. This group could include the UK, Norway, Canada and, potentially, Switzerland.

Europe must also fix its chronic economic underperformance. Between 2014 and 2023, nominal US GDP grew 57 per cent; the euro area just 15 per cent. That gap reflects more than demographics – it points to structural inefficiencies. Fragmented capital markets and limited access to risk capital force many European entrepreneurs to look abroad.

A genuine capital markets union would change that, unlocking investment in green tech, artificial intelligence, life sciences and more. It’s not just about growth. Innovation is the new battleground.

Energy is the third pillar. The war in Ukraine didn’t cause Europe’s energy crisis, but it exposed the risks of dependence. Swapping Russian gas for American liquefied natural gas won’t delivery energy security. Resilience will come from accelerating renewables, upgrading grids, building storage and revisiting nuclear energy – not just for climate goals, but for sovereignty.

In this optimistic future, Europe is more integrated, more dynamic and more secure. It competes globally and stands on its own terms.

The second path is easier – for now. No hard choices. No integration. Just drift.

In that future, defence stays fragmented. Capital remains trapped. Europe continues to punch below its weight. And, as the world grows more volatile, Europe becomes less relevant.

We’ve seen this before.

In the mid-1980s, Europe was adrift – weak growth, institutional fatigue, geopolitical anxiety. Then-US president Ronald Reagan’s arms race unnerved many after a decade of detente.

Europe responded with the 1986 Single European Act, which laid the groundwork for the single market. It streamlined decision-making and revived the integration agenda. Europe rose to the moment then – and it must again.

This time, the stakes are higher. The next round of reforms must secure not just prosperity, but sovereignty.

Business has a role to play too. Just as industrial leaders helped drive integration in the 1990s, today’s chief executives must help shape Europe’s renewal − not just because it’s good policy, but because a fragmented, inward-looking Europe is bad for business and worse for society.

Leaders like Henrik Andersen, chief executive of Danish wind turbine maker Vestas, offer a useful example. He has urged Brussels to align energy, trade and industrial policy – not out of idealism, but because Europe’s competitiveness in clean tech depends on it.

So what must Europe do − urgently and decisively?

First, it must provide for its own defence. With US electoral cycles growing ever more unpredictable, European security can no longer hinge on transatlantic assumptions. A credible defence posture is essential − not to replace Nato, but to rebalance it.

Second, Europe must unlock capital and innovation. Fragmented financial markets continue to stifle scale and ambition. While North America accounts for 60 per cent of global scale-ups, the EU claims just 8 per cent. A capital markets union is now critical to mobilise European savings, fund its own innovation, and reduce reliance on US capital.

Third, the green transition must accelerate − not simply as a climate imperative, but as a strategy for resilience and sovereignty. Renewables, and where appropriate nuclear, should anchor an energy strategy capable of withstanding geopolitical shocks.

And finally, Europe must engage globally with coherence and purpose. It has a foreign minister, but still lacks a foreign policy. That must change. Building stable, values-driven partnerships with powers like India, Saudi Arabia and even China will be essential if Europe is to remain an active shaper − rather than a passive observer − of the global order.

It’s one of history’s ironies: Mr Trump may be the catalyst for European renewal. By making US commitments less reliable, he’s made European responsibility unavoidable. By rejecting global rules, he’s made European leadership indispensable.

This is not just another chapter in Europe’s integration story. The world has changed − and with it, the stakes. The time for hesitation is over.

Now is the moment to act.