Europe at a Crossroads

As the world of yesterday fades away, Europe — whose model has remained unchanged since the end of World War II — is being overtaken by history. With the course of the coming decades to be decided in the years ahead, European countries find themselves, more than ever, at a crossroads.

Europe as it exists today has developed in the wake of globalization. The Treaty of Rome, the creation of the single market during the financial liberalization of the 1980s, the Maastricht Treaty, and the introduction of the euro laid the groundwork for the Old Continent to prosper. For decades, assuming that this order would endure and lacking any vision of its own, Europe therefore decided to entrust its fate to foreign powers — whether its foreign trade to China, its energy to Russia, or its security to the United States. The continent followed the course of the world and organized itself according to the law of the strongest, under the auspices of the European Union. The countries of the North, whose geographical location affords them obvious stability, have thus benefited greatly from European integration, to the detriment of the countries of the South. The 2008 crisis and the ensuing sovereign debt crisis were the clearest illustrations of this: the countries most severely affected were, above all, Greece, Portugal, Cyprus, Italy, and Spain.

But the world has changed. In this era of multiple crises into which we are entering — where a new order is taking hold — all of the Old Continent’s vulnerabilities are thus being laid bare. Yesterday’s winners are today’s losers — Germany is becoming the “sick man of Europe.” Amid deindustrialization, sluggish growth, loss of competitiveness, and a slowdown in production… European countries are thus discovering, through painful experience, that they cannot compete in the emerging global landscape. This is all the more true since they possess neither the hegemony of the dollar, as the United States does, nor a centralized policy, as China does. With an intractable financial situation and a virtually nonexistent European budget (less than 1% of GDP), no large-scale investment is possible. Finally, the lack of fiscal and budgetary harmonization across the Old Continent limits European countries’ ability to act collectively.

Consequently, Europe finds itself not only powerless but also threatened by its lack of autonomy and the end of a peaceful international order. Its subservience to the United States is, in this respect, more evident than ever[1]. The ongoing war in Ukraine continues to demonstrate this. With the destruction of Nord Stream 1 and Nord Stream 2, the world’s leading power has achieved a two-pronged victory: further distancing Europe from Russia and replacing European purchases of Russian gas with energy from across the Atlantic. But this situation is all the more critical today, given that Europe is becoming Ukraine’s sole financier through military equipment that it purchases from the United States — even as Washington has withdrawn all support for the regime in Kyiv. Finally, Ukraine’s likely accession to the European Union would definitively cement this vassalage due to the massive wave of relocations that would result — with tragic consequences for European countries.

But this dependence has, in essence, become so deep-rooted that it no longer seems to allow for a return to the past, unless one is willing to enter into direct confrontation with the United States[1]. No countermeasures or trade policies are therefore truly being considered. Worse still: European countries are resigning themselves to this situation, as evidenced by the recent vote in favor of the United States’ asymmetric tariffs on European imports, or by their persistent alignment with the U.S. agenda in an escalating trade war with China. At this rate, we can therefore conclude that the fate of the European Union will remain tied to that of the United States and that the inevitable decline of the world’s leading power will, at the same time, result in the decline of the European Union.

Contrary to the vision of its founding fathers, Europe is therefore not making progress in the face of crises but, on the contrary, is seeing its decline accelerate[3]. Following the 2008 crisis — which affected European countries more severely than the United States — and then the health crisis and the war in Ukraine, the conflict in Iran and the resulting new energy crisis are further proof of this. While the ECB believed inflation had been definitively contained (after initially declaring it transitory), it is now on the rise again and threatens to become entrenched due to member states’ growing debt, the continent’s accelerating population aging, the resurgence of protectionism, and impending shortages. Furthermore, the temporary depreciation of the euro against the dollar — linked to rising U.S. bond yields — is driving up the price of imported goods in Europe. Finally, without strategic independence, European countries will also be among those hardest hit by rising prices in the coming years, as scarcity becomes a reality at every level. And the return of inflation, far from strengthening their competitiveness — let alone reducing their debt — is already threatening nearly 1.3 million jobs across the continent.

But the main danger lies, above all — as it always has — in the risk of a breakup of the eurozone linked to widening interest rate spreads between several countries, particularly between France and Germany. However, the inevitable rise in interest rates to combat inflation (as evidenced by the ECB’s recent rate hike in June) and the automatic surge in European countries’ debt (Brussels has realized the futility of a 60% debt-to-GDP ceiling) will only exacerbate this situation.  The ECB can no longer control either risk or timing as it once did (especially since it is also plagued by negative equity, which undermines its credibility). This haunts the Frankfurt-based institution today more than ever; while its primary objective is certainly to maintain price stability, its overriding priority is to protect the eurozone. Due to the constraints of a single monetary policy for twenty-one countries — and since it can no longer lower its interest rates — the ECB may therefore be forced, as it has done in the past, to deviate from its long-standing rules of market neutrality in order to buy back the debt of only those countries affected by a debt crisis. France, the eurozone’s second-largest economy, is now threatened by this situation[7], especially since its deficit is expected to rise in 2027 and the presidential elections raise fears of a market attack at any moment. However, all other things being equal, this action would essentially only further postpone the consequences of a future crisis, increase wealth inequality across the continent, and accelerate banking and financial concentration (as evidenced by UniCredit’s acquisition of Commerzbank and BPCE’s acquisition of the Portuguese bank Novo Banco), to the detriment of the real economy and the productive fabric of the member states. This scenario is all the more likely given that member states, more broadly speaking, intend to continue this headlong rush by building a single European state to enable, among other things, an increase in the federal budget, the improvement of the single market, the introduction of joint borrowing, and even the digital euro — which would serve as a safety net in the event of a crisis and is scheduled to be implemented in 2029 following its recent adoption by the European Parliament. As if strengthening a framework that already functions poorly were the solution — especially since every country would, on top of that, be held accountable for its neighbors’ mistakes. Thus, European countries find themselves, more than ever, at a crossroads and must understand, as quickly as possible, that no collective change will come about until each of them holds the keys to its own destiny. Their survival depends on it.