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Europe has the strength to define a new global order grounded in balance, openness and peace. Unlocking this potential, Barth argues, requires the courage to let go of what Europe used to be.
As I argued in the first piece, Europe is not merely stuck in an economic or political crisis. It is stuck in an identity crisis. The decisive question today is whether the EU can build a position of inner and outer strength – whether it can revive its "spiritual vitality", to use the words of the US strategist George Kennan - to carve out its own middle path between a collectivist China and a techno-individualist US. For all their differences, they agree on one thing: carving out the world into spheres of influence, where Washington's fossil-dominance agenda and Beijing's bid to become the ultimate electro state stand irreconcilably opposed.
To stand up for itself and craft its own vision of a future world order, Europe must first regain its own sense of agency and self-confidence by sitting through a collective therapy session. It is its past identity, the ideas, assumptions and promises underpinning the free-market order on which the EU and its institutions have been built - that stand in the way of what we believe Europe can become. As they are imprinted on the brains of all of us, they define our personal and by extension Europe's mental space for imagination, for our future and Europe's identity and institutions in turn.
It is by stepping through the five stages of grief as a process of detachment from the past, that will Europe will be able to embrace the Electro Union agenda Olivia Lazard set out in her compendium – the twelve steps whose success they will have a significant influence on all our fate – be it as investors, managers, start-up leaders, consultants, civil servants, NGO representatives or politicians.
Before we approach the stages of grief – let's briefly align on an understanding of what the European Union is. Many associate the EU and Brussels with bureaucracy and an open market. Yet this association forgets that the EU's institutions and its bureaucracy was built to serve a bigger purpose - a set of key powerful promises that shape our thinking until today. At its centre sits the promise of growth of prosperity – in the form of the single market it meant the promotion of affordability and cheapness to enable that citizens get access to an ever-growing abundance of goods. Progress and peace would follow from this market integration and trade – the single market in the EU and by extension the trade agreements of the WTO.
It is on the foundation of these promises, that Europe defined a clear sense of self. It became the protector of fair and rules-based market order, the beacon of multilateral cooperation and trade, and the advocate for prosperity and peace through openness. It is worthwhile to remind us, that it is because of this identity that until today the trade and competition departments – as guardians of free trade and competition—wield the highest institutional influence in the Commission and the governments of member states alike. They represent the soul of what Europe is and has become, the principles on which Europe's institutions have been built: balance, openness and peace.
The pretext to the Electro Union – the EU's climate agenda – inherited these promises without question. We encounter them whenever the EU Commission calls for cheap and abundant energy, when the clean transition is reduced to a cost minimization exercise, or when climate change is primarily viewed as a multilateral challenge rather than one of shifting trade and power patterns. Olivia Lazard has outlined this in more detail.
For some years, aligning the climate agenda with these promises proved to be tremendously successfully. It provided the foundation for the Paris agreement and in turn triggered the very innovations in clean technologies that helped bent the cost curves of everything from solar panels to batteries. None of this should be waved away. And yet, as both Europe and the world moved from setting global targets to delivering them, the cracks in the foundations extended from the shadow to the centre of attention. If Europe's principles and values should survive a world of power politics and if the Electro Union is to work, we can no longer afford to look past them.
The first crack: cheapness over jobs
The first crack runs through the prosperity promise. Hidden behind "prosperity through affordability" stood the assumption that cheapness would trump jobs. "Consumer welfare", the sheer quantity of what people could buy, was the primary concern – both for trade and competition. The question became less one of who produces, but what price people pay. It is on this altar of affordability that Europe sacrificed its textile, shipbuilding and solar industries to cheaper Chinese producers. On the same altar it tolerated an unprecedented concentration of markets across the whole economy, because scale (bigger companies are more efficient), again, drives prices down.
For a while, it was possible to ignore the pains of this view. Other, growing sectors absorbed the workers who were freed up, and millions of consumers felt the world available to them getting cheaper. But that only worked up to a point. Take agriculture. It is on the grounds of competition and affordability, that agriculture saw tremendous market consolidation and lost 5.3 million farms in only 15 years. To understand the anger directed at political institutions today, we have to look beneath the surface, where the tensions built – in regions whose development is trapped or the places where uneven impacts of inflation break the promise of cheapness.
Little of this is news. And yet it was only now, when the threat reached the core of Europe's industrial base – its 13 million workers in the car industry – that Europe's political leaders started to stop denying that the obsession with prices might have been to narrow. That the weighting between prices and jobs, as the main preconditions for people's sense of self, security and belonging - might need to change.
And yet, even now, it is unclear whether the Industrial Accelerator Act or the Commission's latest tariff proposals towards China will be carried forward. The old reflexes are yet too visible – be it when political leaders remain reluctant to confront China's coercion threats, when DG Trade demands the Union's unbroken loyalty to the WTO rulebook, or when DG Clima recalls that cheap prices are essential to the success of Europe's climate agenda.
It is time to stop denying that cheapness is more important than jobs.
The second crack: the limits of the market
The second crack is the belief that markets and competition are the main instrument for bringing prices down. For the Electro Union, the promise takes the form of the Emissions Trading System, the crown jewel of Europe's climate agenda. Increasing emission prices would pull investment into renewables and clean tech and draw prices down. By today the ETS has been credited with much of the bloc's emissions cuts. For long it was believed it would unlock the decarbonisation of mobility and heating too.
"Today the clean transition has turned into a coordination nightmare, where a multiplicity of chicken-and-egg problems is blocking one another."
Again, this is not to deny that the ETS matters, or that it worked for some time. And yet the further Europe moves towards electrification, the harder each step becomes. Rolling out renewables to cover a quarter of final energy demand was relatively easy. It was the era of "energy efficiency first", when transforming power generation did much of the work and the business case made itself. Moving from a quarter to ensuring that renewable energy sources meet energy demand everywhere and at any time in Europe is a different order of difficulty. It is when we come to realize that the costs of switching technologies collide with twenty-year investment cycles. It is when energy system costs of highly variable renewable energy sources move into view, alongside uncomfortable questions how to decommission the past fossil energy infrastructure. Germany alone sits on a gas network of 550,000 kilometres.
Today the clean transition has turned into a coordination nightmare, where a multiplicity of chicken-and-egg problems is blocking one another. Electric vehicles and charging points; heat-pump deployment, heat-pump prices and heat-pump demand; hydrogen pipeline construction and offtake guarantee; electricity grid stability and storage.
We are reaching the moment where the clean-tech transition meets the ground of reality, where no business case stands on its own, because every investment depends on someone else's. For the ETS and emission prices to be able to drive long-term investments at the scale required and the timeframes in which innovation succeeds in getting prices of green technologies down fast enough, the hight of the prices simply clashes with what is politically feasible - something MIT economist Daron Acemoglu pointed out more than a decade ago.
Many in DG Clima and national climate ministries have come to terms with this reality. They didn't spare any effort to coordinate the actors and investments involved. But all of this doesn't help if all other departments – first and foremost finance and economic departments– cling to the idea the ETS alone will fix it all. For the ETS to work, it needs to run in tandem with industrial policy, with targeted regulations and a plan how to make the sunset of outdated infrastructure work. Everything else is denial of the reality we face.
The third crack: the collapse of the free-market theory of power
The third crack runs through the promise of peace being achieved through free trade. The whole logic of the open markets rested on one critical precondition: trust. Trust that no one would weaponize a trade dependency. Trust that everyone, the American hegemon included, would adhere to the global rules. The promise was one of a fair game, of ever-expanding cooperation, in which dense trade relationships would force unequal powers into a delicate balance of peace. It was on the grounds of this trust that Paris was negotiated, and countries committed to drawing emissions down, despite the fact that some would benefit and others would lose in the process.
Yet that promise was fragile from the start. As Newman and Farrell showed it was under the banner of fair competition, the US rolled out the internet and wove a global web of financial and information flows that became a new powerful lever for coercion. What looked like beneficial trade and progress from one angle, looked like hidden power projection from another. That ambiguity turned fatal in the moment the precondition for trust broke down: that the US would bind its own power. The US complied as long as the WTO served its interests, but walked away in the very moment when it became clear the rise of China would challenge US hegemony. We are now once again entering a world where national security concerns trump global cooperation.
The fallout is cruel. All of a sudden, everything that was an asset under conditions of trust, became a liability in the instant trust dissolved. David Ricardo's ideas of "comparative advantage", one of the principles behind the WTO and the very justification of concentrated and critical trade dependencies – from critical raw materials, LNG, to digital infrastructure –, turned from a promise of shared prosperity into a curse.
The consequences for the Electro Union are severe. The clean transition that began as a process of multilateral cooperation has become the world's largest power gamble. The climate agenda as process that requires unprecedented cooperation between the nations of the world, produces precisely the tensions and the resulting shifts in power that make cooperation difficult through the new markets clean technologies create. The prospective electro states, the winners of the transition, now face the entrenched interests of fossil-fuel exporters, and both sides weaponize whatever they hold, economic, digital, security dependencies alike.
The clean transition and the conditions for global trade are no longer separate issues, but the same. To escape denial, Europe needs to stop defending a broken WTO system that rests on political conditions that are no longer there. Instead, it needs to start rebuilding the conditions for trust from scratch - working towards partnerships that help defend a space of global cooperation and can contain the coercion of superpowers once again.
When a promised future collapses, anger is the natural response. On the left, anger is directed at the failure to deliver on Europe's social and environmental ambitions – linked to the third crack. On the right, it results from the first crack: the experience of insecurity, displacement and the loss of stability that big parts of the society have experienced during the last decades and that stand in stark contrast to the promises of a prosperous world.
The tragedy is that while addressing the anger's causes requires agency, the opposite is its result: the polarisation of political positions, producing paralysis and a self-inflicted incapacity to act.
The political answer by the democratic centre to escape that trap of polarisation cannot be to argue against anger, but to acknowledge it. It requires from European leaders a radical honesty that the promises remained unfulfilled.
People want more than consumerism, competitiveness, open markets and a flood of cheap goods could provide.
Progress – if it is supposed to be inclusive, sustainable and shared - cannot rest on an anonymous market mechanism alone that fails to provide the necessary certainty for investments at a price for emissions that society is able to bear.
And agency – in a world where the markets' incumbents have an ever bigger say and where trust in global rules has collapsed – does not come from working within the current confines of power, but from proactively shifting them – by crafting global rules that account for the risks of concentrated trade relationships, pool fragmented leverage to negotiate with superpowers or limit the political influence of vested interests.
One escape from people's rage is to show that politics draws the right lessons from why the past promises broke. It is in the cracks of the old promises that a new idea of Europe, of its role in the world and of its future can grow – one where Europe not simply drifts into superpower conflicts, but define its own global role without collapsing into the extremes of a techno-individualist America or a collectivist China.
One of the biggest threats for Europe today is that today's leaders, rather than working towards a renewed European identity that redefines its role in the world, are stuck in hollow compromises that fail to draw exactly the lessons that the anger of people demand.
Recall Mario Draghi's Competitiveness Agenda. While it is true that it breaks with the free-market order by embracing industrial policy, it is striking how silent it stays on other questions that matter. How does it win back the people who are angry? How does it guard politics against the capture by the tech champions it envisions, the capture already on display in the US? How does it survive a world where Washington and Beijing use every tool they have to undermine European coordination? Instead, Draghi's report is coated in the language of a distant technocracy, still trusting that if business thrives, people will thrive with it. It is a story that has proven to not work on its own.
Friedrich Merz's response so far risks to take a similar shape. As important as Germany's military rearmament and the increasing alignment on defence cooperation on Ukraine are, they are not enough to provide the political and institutional conditions for Europe's strength in an age of hybrid warfare and geoeconomic coercion.
Europe's leaders keep missing the deeper reason why the continent struggles to find a position of its own: the conditions on which Europe's institutions rests and the promises about how to provide safety, progress and agency do no longer hold. But rather than daring something new, they let themselves be guided by the broken assumptions of the past – narrow notions of security, WTO compatibility, competitiveness, the primacy of prices, cheapness and consumption.
Escaping bargaining would mean to update these assumptions. Be it Friedrich Merz or Macron, today's political moment demands them to follow the example of Jacques Delors, Robert Schuman, Helmut Kohl or Konrad Adenauer: investing political capital to build a new story of what Europe has to become.
Maybe you are someone who is despairing at the argument so far. In a world of violent change, aren't the few sparks of leadership – a Draghi, a Merz – exactly what we should be celebrating rather than picking apart? Or you have already given up on political engagement altogether, and wrote off government as meaningless, exhausting, futile. You might wonder where to find hope. Part of mourning is that hope returns only on the far side of discomfort.
Where I find hope is not in any clear picture of the future but in remembering similar moments of the past. The industrial revolution, when children worked thirteen-hour shifts in conditions we can barely stomach to read about. The Gilded Age, when corporate trusts seized control of the American economy, from steel to oil to meat. The wars of the twentieth century, which killed millions and produced some of humanity's biggest horrors. Put yourself in the shoes of someone alive then. They had every reason for despair. None of them could have pictured what followed – that the cruelty of working in factories would give birth to the welfare state, that democracies would face the power of trusts and break them up, that the horror of the Second World War would be followed by decades of relative European peace and the founding of the United Nations.
Naming this I don't want to excuse the inhumanity of the moment by the light that came after. I want to say that hope lives in future's inherent openness and that every current in history calls forth a counter-current with the power to bend its course.
The question for us "Europeans" is simply how bad we let things get – how long our leaders, and we as the voters behind them or the businesses speaking to them, wait before we allow the counter-currents to rise. The faster European leaders accept the promises of pure competition, open and free markets no longer hold and the faster they let go of the European identity associated with them, the less painful the transformation of Europe and the more successful it will be.
Becoming someone new, taking on a new identity, is never easy. It is no easier for a continent than for a person. Change means facing uncertainty, the unknown, chaos – and people as much as politics fears all three. What can give us confidence is the clarity about expectations; clarity about what the change of today's institutions will hold: what we will keep, what we need to let go, and what we build.
| What to keep | What to let go | What to build |
|---|---|---|
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Europe and its institutions rest on the values of openness, peace, balance and dignity. These principles are worth carrying forward. Openness to cultures, to difference, to partners. Peace, won through strong institutions that hold the continent's unequal powers in careful balance. Dignity, as the commitment to give people – now and in the future – the conditions for a meaningful, self-determined life in freedom.
Balance in the form of institutions that give everyone a say and ensure the less powerful are not left at the mercy of the powerful. The institutions that carry these values, from the European Treaties, the European Convention on Human Rights to the Union's commitment to tackling shared global challenges, from AI to climate, must be preserved. They are the precondition for Europe to define its own offer between the US and China – an offer grounded in hard-won lessons of a history of war and destruction: internal cohesion, understanding and peace. |
Europe's last identity and most recent history grounded the whole project in economics. It translated openness and balance into a celebration of free markets and competition, dignity into equal opportunity and market access, peace into ever-deeper trade integration and the containment of the democratic state. In result, government shrank into a provider of the conditions under which markets function.
That primacy of economics has to go and with it, a whole set of assumptions. The view that reduces citizens to consumers and workers; the faith that markets, simply because they lower prices and spur innovation, will serve the common good and hold corporate power in check; the idea that government exists only to fix market failures; the belief that trade must never discriminate between partners and is always mutually beneficial; the conviction that business competitiveness will, on its own, restore political and social cohesion. The anger at public institutions today has laid bare what it costs to understand progress in economic terms alone. |
What Europe has to build is the capacity to hold its commitment to openness, dignity and peace in balance with the strength to defend these principles against those who would exploit them.
Looking inward, that means a new understanding of how government, business and citizens together create the conditions for prosperity, progress and peace. Prosperity must become a shared promise again – measured not in consumption alone, but in the fuller set of conditions Europe has built: its living standards and social security, its cultural richness, the civic spaces where people find belonging and community. This requires governments to overcome a self-image of being a fixer of market failures and instead step into their role as mediators, balancing the strategic interests of the state, the individual, the community and the firm without collapsing into any one of them. An identity that prioritizes social cohesion has to hold the tension between people's need for stability and the embracement of societal and technological change that dignity and progress demand. That asks civil servants to be more than problem-solvers. It asks them to become conveners – the keepers of the space where today's coordination problems get solved. Done well, this convening shapes a path Europe walks together, rather than a contest won by the stronger side, or the better-mobilised interest. It replaces the tug-of-war of vested interests with something genuinely generative. Looking outward, in a world turned hostile, Europe's openness cannot be allowed to become a weakness. That is the lesson to take from Olivia Lazard's intervention. Openness has to be turned into a renewed European offer to the world, one that pairs it with reciprocal conditionality: radically open to anyone who shares its principles, fierce towards anyone who defects. |
At the Munich Security Conference earlier this year, we argued that this requires Europe to lead on the establishments of geopolitical coalitions around four D's. Deterrence through pooled leverage by using Europe's combined geoeconomic weight, together with partners, to raise the cost of coercion and shift an adversary's calculations. Differentiation in trade by reserving benefits like tariff access for partners who commit to shared challenges, and withholding them from those who defect. Decarbonisation as common ground by turning energy security into a source of resilience, alignment and influence. And the development of future markets as an incentive achieved through technological upgrading, pooled demand, and the complementary strengths partners bring to one another.
Building coalitions and clubs around these principles – starting with middle-powers – may require the EU to step outside the WTO framework. But their architecture may well become the blueprint for a post-WTO world: a trade order that heals the mistakes of the past, restores the conditions for cooperation, and builds in the balancing and reciprocity mechanisms that can both contain the weaponisation of trade and restrain the outsized power the US and China hold over the rest of the world.
We began by calling Europe's paralysis what it is – not an economic or a political crisis, but a crisis of identity. The five stages of grief show us we can work our way out: escaping one by one denial, anger, bargaining, depression, and finally reaching acceptance, the point at which Europe can let the old identity go and reimagine what it wants to be.
What does this mean for the Electro Union? Many of the institutional changes can be found in Olivia Lazard's compendium. But the Electro Union is no longer a merely technical undertaking. It becomes a civilisational quest, where the institutions Europe builds matter as much as the identity it adopts, the ideas, assumptions and promises it holds, the role its governments take, and the principles it upholds when it engages with the world.
I opened the first essay with the question whether Europe, in a world turning against it and against all odds, could learn to believe in itself again.
The answer is not by clinging to what it was, but by daring to become what only it can be – a continent that commits to the principles of openness, dignity, peace and balance, and builds the inner and outer strength to defend them.
Jonathan Barth is a Visiting Fellow at the Institute for Sustainability Leadership at the University of Cambridge and an affiliate of the Bennett School of Public Policy. He is the co-founder of various Think Tanks, including the Geostrategic Europe Taskforce, where he served as Executive Chair until June 2026, and ZOE institute for future-fit economies where he served as Policy Director until June 2024. He is a Fellow at Think Tank 30 of the German Society of the Club of Rome.