Rescue sometimes comes from surprising places. For Europe, the most recent effort came in the figure of Paul Krugman. Ahead of the summer break, the American economist made the rounds advocating for a drastic rethink of how Europe perceives itself, of the role it wants to play in the world and the future it envisions. Yet, so far, all previous wake-up calls – from Draghi, to Letta to Merz and Macron calling on the EU to learn the language of power - have fallen way short of what is required. With this essay I argue, what stands in the way of Europe’s new “becoming” is not mere politics but its attachment to its past. Liberating itself from the identity that has been assembled throughout the last decades is not merely a political and institutional, but also a psychological and ideational act. It requires political leadership as much as a collective therapy session that enables us as “Europeans” to let go of who we think we are. Only then can we move closer to the political architecture that the future of this continent demands. 

Let’s briefly recap why this matters. Whether you are an investor, a manager, a start-up leader or a consultant – like it or not – the political conditions that Brussels, Berlin or Paris shape today and their success will strongly affect your and your business’ fate. Ahead of this summer Olivia Lazard has pulled together the ambitious changes required to transform the EU into an Electro Union. Her twelve-step compendium is not merely a technocratic checklist, but a call for political leadership at historic scale resting on “discernment, inventiveness, risk appetite, courage and mobilisation”. The continent stands at a historic juncture. And I believe it is important for all of us – I imagine you are either from the private and the public sector when reading this – to understand why Europe is so stuck. 

I will begin with leadership. We all know leadership requires optimism and courage – be it in businesses or politics. Yet this attitude stands starkly at odds with how Europe’s leaders have been bathing in self-pity throughout the last years. It started with Mario Draghi. His Competitiveness Agenda – however right and ambitious some of its proposals may be – by now has become the blueprint for presenting Europe as weak. Since then the whingeing didn’t stop. Europe was called an “owned continent” , becoming a “museum” , a naïve “herbivore” in a world of “carnivores” , or “crippled” by over-regulation. The collective state of depression is no surprise but self-inflicted. And as we all know, depression is fatal: no start-up, no investment, no project has ever taken off in a state of self-pity. This is not different for politics. Depression breeds helplessness and despair, rather than the urgently needed self-confidence and a belief in one’s own ability to act – against all odds. The decisive question for us as “Europeans” is to ask how we can, in a world that seems to be turning against Europe, again believe in ourselves, believe in the strength of Europe and the vision it pursues. Against all odds.

"Europe outperforms the US on almost every single thing that matters to a good life."

This is where Krugman offered help. He challenged one of the key assumptions underpinning Europe’s sense of decline. (For non economists the analysis is not straightforward, I still recommend reading the discussion). One of Draghi’s key claims was that Europe is in decline because its productivity growth lags behind the US. Krugman questioned this very assessment; not so much whether Europe is falling behind on aggregate productivity (the prime indicator for “competitiveness”), but whether this gap actually constitutes a problem. Because, paradoxically maybe, so far there is no divergence in Europe’s relative GDP to the US, if compared along living standards. His explanation: the US and European economies simply produce different mixes of goods. The Draghi report, read carefully, confirms this: the productivity gap is concentrated in the high-tech sector. In machine-building, biotech, and other industries Europe is strong in, no such gap exists. (Together with Lukas Bertram I have outlined this before, when identifying the sectors that Europe needs to defend). 

Europe instead has many reasons to be proud. This sense for pride increases even further if we shift our gaze beyond the narrow notions of productivity. If we view competitiveness through the lens of complexity, for example, and rank countries by their diversity of knowledge, and their ability to combine it in ever new ways, many European countries make it to the global top – not only Germany, but Austria, Czechia, Latvia, Slovenia and Sweden as well.  Or look at how the wealth generated by its economy is used. Europe outperforms the US on almost every single thing that matters to a good life: life expectancy, women in the workforce, workplace deaths, equality, health, infant mortality and student debt. Its another way to think of efficiency. Not of outputs, but of outcomes.

That the EU starts to be more confident about what it has to offer, however, is only half the point. Behind the geopolitical posture that Olivia Lazard asks Europe to adopt in her compendium, stands a different question. The same question that also Krugman, raised at a panel in Rotterdam: “the future of the world economic order – whether there is any kind of order at all – depends a great deal on what happens in Europe.” What Krugman and Lazard alike ask, is how this Union of 27 countries wants to position itself in this new era of power politics: should Europe simply join the muscle-flexing and geopolitical posturing that is increasingly defining statecraft across the globe? Sure, Europe has leverage to play the game of power, if it chooses to. But playing to Europe’s non-technological strength surfaces another way forward: using the capacity to craft institutions that do not simply project power for power’s sake, but balance unequal powers (think Germany, France, Italy, Poland and Spain…) in ways that benefit everyone and sustain peace. It is a reminder to those who miss a European power model – it doesn’t have one but a power-balancing model.

That does not mean Europe can afford naivety. The EU still requires the stronger geopolitical posture Olivia Lazard has described. But the question behind Europe’s power move becomes one of intention: is Europe acting to protect its own values and interests? Or to position itself as an eye-level mediator among the global community –committed to building trust, fostering understanding, and proposing global institutions capable of enabling a lasting positive peace and holding unequal powers in balance?

All – Europe’s geopolitical survival, its pride in its own achievements and its awareness about its strength – are inseparable as history shows. The Cold War was not merely won because the US simply outmuscled the Soviet Union, but because the inner tensions and fracture lines of the USSR became impossible to contain. Europe would do well to learn a lesson from the man who was standing behind this grand strategy: George Kennan. In the 1960s his prescription was that the country that wins is not the one that holds more air carriers or tanks, but the one that projects “among the peoples of the world generally the impression of a country which knows what it wants, which is coping successfully with the problems of its internal life and with the responsibilities of a world power, and which has a spiritual vitality capable of holding its own among the major ideological currents of the time.” It is a stark reminder that there is more to geopolitics than material strength.

In a way China successfully adopted this model. One year after Fukuyama declared the end of history, Wang Huning – today China’s “crown theorist” – spent six months travelling the US. The result was a book called America Against America. Faced with the inherent contradictions of American capitalism and the high levels of inequality, his argument was that the US system - built on individualism and hedonism - is working against itself, “clearly losing out to a system of collectivism“.

Europe’s path – of course – is not Chinese collectivism. But neither should it be the extreme individualism and blind techno-optimism of the US – which has, somewhat alarmingly, become the default reference point for much of Brussels’ and Mario Draghi’s economic thinking as we can see in the praise of the very tech monopolies have become the biggest danger for freedom and democracy today. Europe needs its own identity. One that is grounded in balance: a continent that carefully holds in balance freedom and social responsibility, innovation and social security, individual ambition and community, military strength and a commitment to peace, the interests of today and of generations not yet born. Philosophically speaking, it is a continent built to hold in tension the very forces that – pushed to extremes – tear societies apart: chaos and order, change and stability, the decentral and the centre. That is what Europe was built to do and that is what it has the potential to become.

"We asked why Europe is so stuck. The answer lies in no-longer understanding Europe’s crisis as economic or political. It is stuck in an identity crisis."

Crafting this identity is not simple. The steps required have been laid out in Olivia’s Electro Union compendium. In some areas, it means simplify regulations and get rid of outdated demands that no longer serve any purpose. But the obstacle is not only regulation or political support. It is ideology – not in the pejorative political sense, but understood in philosophical terms: the set of ideas that shapes how we as “Europeans” see ourselves, each other, and the world around us. A friend once told me, ideology is when you don’t know you’re thinking. That is exactly the point. The market-liberal, rules-based-order playbook that underpins the EU we know today has become the subconscious mental infrastructure that guides our actions today, like when you are brushing your teeth. It is reflected in the labels we attach to Europe – a single market, a bureaucratic monster, an economic project, a regulatory superpower. From what we believe is possible to what we treat as sound economic policy – the scope of political feasibility and desirability is defined by assumptions about how to produce prosperity, progress and peace – and the roles politics, business and society are each supposed to play. These mental routines have become an automatism, but we no longer are aware how they limit us in what we do. 

We asked why Europe is so stuck. The answer lies in no-longer understanding Europe’s crisis as economic or political. It is stuck in an identity crisis. And we are all part of it. The provocation of this essay is that it is our attachment to the assumptions on which the EU has been built stand in the way of reenvisioning the role Europe wants to play as Krugman demands; that block every single move that Olivia Lazard calls for and that the Electro Union requires – industrial policy, the capital markets union, a scaled-up European budget, a refreshed relationship with middle powers, a new offer to the global south, a responsibility toward future generations, a renewed social contract. We see the iron grip of these assumptions every time politics seems incapable of imagining a Union that reaches beyond narrow technocratic competitiveness metrics; every time trade and competition hawks pick apart European industrial policy; every time political leaders flirt with new free trade agreements rather than articulating a new approach to global partnership grounded in geopolitical coalitions.

"What Europe lacks is the political will to risk something genuinely new, to define a new role, a new vision and a new identity."

Understanding Europe’s political paralysis as an identity crisis changes what the next step must be. It is not another white paper, another dataset, another roadmap that we need. As psychology tells us, ideas do not die because of better arguments, but when people let them go. It is a process of detachment – from Europe’s past identity and the ideas, assumptions, the ideology that sustained it. A psychological process. And this is why the next steps can be best captured by the five-stage grieving process as the psychologist Kübler-Ross had coined it: denial, anger, bargaining, depression, and acceptance. Mourning is the method of releasing what we hold dear – in the case of Europe, of an inward-looking economic project centered around the single market. 

Some of you may find this lens surprising, or even irritating. You may want the better argument, a to-do list, an agenda. But if Lazard’s compendium has shown one thing it is that we don’t lack ideas. What Europe lacks is the political will to risk something genuinely new, to define a new role, a new vision and a new identity. And daring to become something new requires to be willing to let the old self go. It is through this liberation that we rediscover the agency, the optimism and the courage this time demands; that we get to the point where we will be able again to reimagine that the Electro Union is not only possible, but grounded in a European identity built on balance, openness and peace. 

If you are someone who feels there is little to mourn, perhaps even something to celebrate, you may be surprised reading this essay. Maybe you blame the old model as having done little to reduce global inequalities but instead as a driver of power concentration and environmental destruction. I invite you to step back for a moment and put yourself in the shoes of the many liberals, who have spent their career building the world, the institutions, and the rules that the European project rests on. The five stages of grief are not there to vindicate that project, they are here to explain why letting go is so hard.

In any way, none of this is comfortable. Grief never is. The uncertainty of the unknown is full of fear. But the alternative - clinging to an identity that no longer holds, to assumptions that no longer work, to promises that no longer arrive, is nostalgia. It is the path towards the “slow agony” that Draghi warned Europe about, the path to slow collapse. And as the one political leader – Mark Carney – who has successfully navigated the stages of grief has said in Davos this year: “Nostalgia is not a strategy.”

This is why Part 2 begins where grief always begins. With accepting what we held dear is dead. With escaping nostalgia and denial. As the first step towards liberation.
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Part 2 of this essay, published on the 10th of September, walks us through the five stages of grief towards a new European identity. A self-help paper for Europe’s continental development journey.

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Jonathan Barth is co-founder and former Policy Director of the ZOE institute for future-fit economies. He’s the spokesperson for the Energy Independence Council, and a Fellow at Think Tank 30 of the German Society of the Club of Rome.

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