Europe has been told to wake up so often that the phrase risks losing its meaning. The sovereign debt crisis exposed weaknesses in Europe’s economic architecture. The COVID-19 pandemic revealed dangerous supply-chain dependencies. Russia’s invasion of Ukraine shattered the assumption that large-scale war had disappeared from the continent. At the same time, intensifying competition between the United States and China has turned trade, technology, energy, and industrial policy into instruments of geopolitical power.
These warnings have been heard. The European Union does not lack resources. Its members include some of the world’s largest economies, advanced industrial powers, sophisticated technology sectors, and increasingly well-funded militaries. The EU also commands one of the world’s largest consumer markets. What Europe repeatedly struggles to do is convert those resources into collective strategic power.
That gap between Europe’s resources and its ability to organize them may determine its place in the international order. EU governments spent €418 billion on defense in 2025, up 20 percent from the previous year, and the European Defence Agency expects spending to reach approximately €454 billion in 2026. Yet only 24 percent of equipment spending in 2025 went through collaborative procurement. Europe is spending dramatically more while still buying largely as a collection of separate states.
Twenty-seven governments can, and have raised defense budgets without building a coordinated European capability. Separate procurement decisions produce overlapping weapons systems, fragmented supply chains, and incompatible equipment, complicating training, maintenance, and logistics. The most consequence is slower collective readiness: small national orders prevent European manufacturers from scaling production and replenishing stocks quickly during a crisis. More money matters, but it cannot deliver collective power unless governments aggregate demand and align requirements. That is why the European Defence Agency has increasingly tied joint procurement to interoperability and faster delivery.
The same contradiction appears in Europe’s economic relationship with China. In 2025, the EU exported approximately €199.6 billion in goods to China and imported €559.4 billion, producing a goods trade deficit of nearly €360 billion. China supplied more than one-fifth of all EU goods imports from outside the bloc. A trade deficit does not automatically signal geopolitical weakness, and economic interdependence should not be treated as a threat simply because it exists. The problem emerges when dependence becomes concentrated in sectors that governments may need during a crisis.
Rare-earth permanent magnets offer a concrete example: 98 percent of EU demand is met by Chinese imports. These magnets are essential to electric motors, wind turbines, robotics, and communications technologies. Export restrictions could interrupt production, raise costs for European manufacturers, and give Beijing leverage during a diplomatic dispute. Beijing and Washington both understand that economic capacity can become geopolitical power. Washington has used semiconductor export controls to restrict China’s access to advanced technologies, while Beijing has imposed restrictions on critical minerals and rare earths, demonstrating how both powers translate economic dependencies into strategic leverage. Europe increasingly recognizes the same reality but has not always translated that recognition into coordinated action.
The European Chips Act illustrates both progress and the limits of Europe’s approach. More than €43 billion in policy-driven investment is expected to support Europe’s semiconductor ambitions through 2030. Yet common legislation and investment targets do not automatically give Europe the shared capacity to finance chip production, coordinate investments across borders, and sustain reliable supplies at scale. Member states still retain major roles in funding industrial projects, selecting national priorities, and competing for investment. Europe can therefore agree on a common objective while pursuing it through fragmented national strategies. The national layer is visible in recent projects: Germany received Commission approval for €5 billion in state aid for the ESMC plant in Dresden, while Italy received approval for €2 billion for STMicroelectronics’ Catania campus. Both projects advance European objectives, but the financing decisions and facilities remain nationally anchored.
That pattern extends beyond semiconductors. External pressure can prompt European governments to cooperate, but it does not automatically create lasting common capacity. The decisive questions are whether governments agree on the threat, how they distribute costs and benefits, and how much authority they give common institutions. The contrast is clear across three cases. Pandemic recovery combined common borrowing with Commission-level monitoring. Defense spending rose without comparable centralization of procurement and planning. Semiconductors occupy the middle ground: shared EU rules coexist with substantial national financing and implementation.
The pandemic showed what Europe can accomplish when political necessity becomes urgent. EU governments created NextGenerationEU, an €806.9 billion recovery instrument. NextGenerationEU was designed as a temporary EU recovery program after COVID-19, financing reforms and investment through grants and loans linked to national recovery plans. Its centerpiece, the Recovery and Resilience Facility, totaled more than €700 billion in grants and loans. To finance the program, the European Commission borrowed on capital markets on behalf of the EU.
That decision was significant far beyond pandemic recovery. The EU did not become a federal state overnight. National governments remained central, and the program was designed as a response to an extraordinary crisis. But governments accepted something they had long resisted: large-scale common borrowing backed by European-level financing and monitoring. The pandemic revealed a simple lesson: when governments agree that a threat requires collective action, the EU can create institutions that previously seemed politically impossible.
Russia’s invasion of Ukraine produced a different outcome. The war triggered a massive increase in defense spending, but the majority of those funds continued to flow through national procurement systems. Europe responded to external pressure with more resources but less institutional centralization than it had during the pandemic. The political bargain was different from the pandemic response: governments agreed on the urgency of rearmament but retained national control over procurement, force planning, industrial preferences, and much of the financing. The result was therefore a faster expansion of resources than of common European authority.
Semiconductor competition is another significant factor. The EU created stronger common rules and a shared industrial objective through the European Chips Act, but financing and project implementation remained divided between European and national authorities. This meant that Europe moved further toward coordination than in defense procurement, but stopped short of the kind of pooled financing and implementation seen under NextGenerationEU. This middle position reflects the design of the Chips Act itself: the EU sets common rules and supports shared research and infrastructure, while major manufacturing investments still depend heavily on member-state financing. Coordination is therefore stronger than in defense procurement, but the fiscal and implementation capacity remains less centralized than under NextGenerationEU.
The three cases point toward the same conclusion: A crisis doesn’t automatically make Europe stronger, it creates pressure. Governments decide whether that pressure produces temporary cooperation or lasting capacity. Across these cases, lasting capacity is most likely when governments share a definition of the problem, accept how the costs and benefits will be distributed, and delegate enough financing, implementation, and oversight to common institutions. When one of those conditions is missing, cooperation is more likely to remain national, temporary, or incomplete.
That distinction should reshape the debate over strategic autonomy. Too often, European autonomy is presented as a choice between Atlanticism and independence, as though Europe must decide whether it stands with the United States or against it. That is the wrong choice. Europe does not need strategic isolation. It needs strategic capacity.
A capable Europe should remain closely tied to the United States and NATO. But partnership differs from dependence. A continent with Europe’s economic weight should be able to act when Washington focuses elsewhere, when the United States chooses not to intervene, or when American and European interests do not perfectly align. That does not require Brussels to control every European policy. In this context, dependence does not mean alliance or routine cooperation. It means lacking enough military enablers, technological inputs, industrial capacity, or financial tools to act when U.S. priorities differ from Europe’s own.
European states have different histories, strategic cultures, economies, and threat perceptions. Centralization for its own sake would create political resistance without necessarily producing better policy. But national sovereignty means little if fragmentation prevents governments from defending the interests they claim to control. Where national coordination repeatedly fails to deliver enough scale, speed, or staying power, Europe should build stronger common institutions — particularly where national approaches repeatedly produce duplicated systems, undersized orders, cross-border capability gaps, or investment races that no single government can solve at sufficient scale.
In defense, that means treating joint procurement and industrial coordination as strategic necessities rather than optional European projects. In technology, Europe needs enough financing and implementation capacity to turn ambitions in semiconductors, artificial intelligence, cloud infrastructure, and other critical technologies into real industrial strength. In geoeconomics, Europe must recognize that a single market alone cannot protect European interests if trade, investment, supply chains, or technology become tools of political coercion. And in financing, governments may have to accept that uniquely European strategic priorities sometimes require genuinely European financial instruments.
In practical terms, that would mean aggregating defense demand earlier, harmonizing requirements, and using longer-term joint contracts so European industry can plan production at scale. In critical technologies, common rules should be matched by financing mechanisms that reward cross-border capacity rather than leaving the largest investments mainly to the fiscal strength of individual states. And where concentrated external dependencies create clear security risks, European-level diversification, joint purchasing, or shared reserves can give the single market more strategic resilience.
A stronger Europe would not weaken the transatlantic relationship. By taking greater responsibility for its defense, strengthening critical industries, and responding more coherently to external pressure, it would become a more capable ally. Europe’s weakness does not make NATO stronger. European capacity does.
The international environment is becoming less forgiving of powers that possess wealth but cannot organize it. China aligns industrial policy with long-term strategic objectives at enormous scale. The United States combines military power, financial influence, technological leadership, and a large domestic market. Russia, despite a much smaller economy than either the United States, China, or the EU, has shown a willingness to mobilize national resources around strategic goals. Europe cannot respond by remaining merely the sum of twenty-seven national capabilities.
The EU has already demonstrated that political barriers can move. Common borrowing during the pandemic would have seemed implausible only a few years earlier. Defense spending once considered politically unrealistic has surged since Russia’s invasion. Industrial policy has returned to the center of European politics as governments confront competition over semiconductors, clean technology, and critical supply chains. Europe has changed. But it has not changed enough.
The next step cannot be another declaration that Europe must become “geopolitical.” The three cases suggest a more practical test: can governments agree on a shared threat, settle who pays and who benefits, and give common institutions the authority to implement decisions? NextGenerationEU met those conditions more fully than defense procurement or the Chips Act. Where they remain unresolved, Europe may mobilize more money without gaining the capacity to act together. That institutional gap is not a shortage of declarations, but the challenge European leaders must confront.
That leaves Europe with a choice. It can continue responding to each crisis through a new patchwork of national compromises, relying on outside powers to fill the gaps that fragmentation creates. Or, it can decide that certain strategic challenges demand collective European tools strong enough to match the scale of the threats.
The goal should not be integration for integration’s sake. It should be effective strength where fragmentation has stopped working. In an era of renewed great-power competition, Europe cannot afford to remain powerful only in theory. If it cannot organize its resources collectively, others will continue shaping the strategic environment in which Europeans must live.
Europe does not need to discover its power, it merely needs to learn how to use it.
