Can Europe Ever Have the Defense and Economic Policies to Thrive Again?

The fate of Europe has recently turned into something of a Rorschach test for Americans. For the Trump administration and its allies, the continent represents a bastion of liberal decadence in terminal decline; the White House’s recent National Security Strategy warned of “civilizational erasure” in Europe and all but advocated for the dissolution of the European Union and the emergence of more populist parties and nationalistic member states. And yet for many Americans, Brussels represents the world’s last hope for steady and rules-based global leadership; many are cheering on its bid to strengthen its own defense and economic capabilities, and to punch back against Washington’s badgering.

But for many Europeans themselves, there is a cloud of pessimism that hangs over all this. They look jealously toward the United States and its higher rates of economic growth and world-beating technology companies, and gripe about the EU’s glacial pace of reform, lack of will, and divergent interests among member states. David Marsh writes Can Europe Survive? in this skeptical tradition. The former Financial Times European editor interviewed dozens of former officials to craft a well-written narrative history of key moments in Europe’s recent past—including the evolution of German-Russian relations, Brexit, and the European debt crisis. He paints an overall picture of a Europe buffeted by a cyclone of internal and external pressures.

But for many Europeans themselves, there is a cloud of pessimism that hangs over all this. They look jealously toward the United States and its higher rates of economic growth and world-beating technology companies, and gripe about the EU’s glacial pace of reform, lack of will, and divergent interests among member states. David Marsh writes Can Europe Survive? in this skeptical tradition. The former Financial Times European editor interviewed dozens of former officials to craft a well-written narrative history of key moments in Europe’s recent past—including the evolution of German-Russian relations, Brexit, and the European debt crisis. He paints an overall picture of a Europe buffeted by a cyclone of internal and external pressures.

The book contains some helpful reporting—particularly on the European debt crisis—but ends up unsatisfactorily dodging the exam question of “whither Europe?” It also offers a hurried treatment of the most pressing challenges facing Europe today. The focus on Germany’s fitful relationship with the Putin, Mario Draghi’s “whatever it takes” heroics to save the euro, and Brussels’ wayward relationship with the U.K. are historically interesting but feel less urgent as Europe stares down a volatile and often openly hostile Trump administration and a mercantilist China that is hollowing out European industry (a topic which Marsh treats only passingly).

Can Europe survive? Indeed it can—and will. Marsh’s existential (and negatively framed) title is somewhat of a distraction. The real question is whether Europe will move at the speed of relevancy to boost its own geoeconomic and geopolitical vitality, enabling it to act as a forceful player on the world stage rather than a victim of events. On this, the jury is still out, and there is ample evidence in either direction.

A Spanish military instructor (right) trains a group of Ukrainian soldiers at the Spanish Army base in Toledo, Spain, on Dec. 2, 2022, as part of EU military assistance to Ukraine amid the country’s ongoing conflict with Russia. THOMAS COEX/AFP/Getty Images

And the invasion of Ukraine saw Europe rally to Kyiv’s aid in a way that surprised outside observers: Brussels imposed sweeping sanctions against Moscow and froze 210 billion euros in Russian central bank assets, survived a previously unthinkable nearly full shutoff in Russian gas (which had accounted for 40 percent of imports), and has furnished 201 billion euros in military and financial aid to Kyiv, compared to 115 billion euros from the United States.

The second Trump administration has provided yet another near-existential jolt to the continent, threatening sky-high tariffs and even the annexation of Greenland—and again Europe has taken dramatic action in response. Germany announced an infrastructure and defense plan that could be worth up to 1 trillion euros, smashing its debt brake (yet another sacred cow) to boost growth and its own military capabilities. Europe launched a successful 150 billion euros in jointly funded loans to member states for defense procurement as part of its Readiness 2030 program, and earlier this month approved a loan worth 90 billion euros to keep Kyiv in the fight through 2026 and 2027.

And that’s not to mention the 2024 Draghi report on enhancing Europe’s economic and geopolitical competitiveness and the flurry of associated efforts to break down internal barriers and protect its own economic interests—from the EU’s Competitiveness Compass to economic security initiatives and progress on the savings and investment union plan to unify Europe’s notoriously fragmented capital markets. Today, all of Europe’s most important leaders—whether Ursula von der Leyen in Brussels, Emmanuel Macron in Paris, or Friedrich Merz in Berlin—are committed to progress on further integration and a more sovereign and capable Europe.

Even many of the stories Marsh tells leave the reader with a grudging faith in Jean Monnet’s famous dictum that “Europe will be forged in crisis.” The extraordinary measures that Draghi took to save the euro during the debt crisis are case in point: In 2011, the euro was on the brink of collapse; today, the euro has gained more than 10 percent on the dollar since Trump’s inauguration as the world views the single currency as an increasingly reliable safe haven and the European Central Bank a model of central bank independence and competency.

What’s not to like? Open your eyes a bit more and the frustrations and challenges emerge. Take Russia. Europe fumbled the ball in December 2025 by refusing to seize Russia’s frozen assets outright, a key test of political will on whether Europe would prioritize supporting Ukraine over inflated concerns about the impact of confiscation on Europe’s attractiveness for international capital. If Europe can’t muster the steel to use Moscow’s own money to defend Kyiv, what does that bode for when Europe’s budgets get tight?

European Commission President Ursula von der Leyen talks about the EU Competitiveness Compass in Brussels on Jan. 29, 2025. MARTIN BERTRAND/Hans Lucas/AFP/Getty Images

On generating European defense capabilities, the money, so to speak, is not the main issue. Since 2022, Europe’s defense spending has increased an eye-watering 50 percent, and the new NATO target of 3.5 percent of GDP going toward defense budgets will, in theory, increase European spending by hundreds of billions a year more by 2035 if the political will for higher spending can be sustained.

The problem remains the way in which Europe is embarking on its own rearmament. Spending is still happening in a largely distributed fashion across competing national champions, with only marginal progress in the way of shared platforms and planning that will generate scale. Moreover, since 2022 an estimated 36 percent of European defense contracts have gone to U.S. weapons. If Europe is serious about defense readiness, it needs to spend at the EU level on shared systems and platforms within Europe, potentially using joint EU funding rather than relying on national budgets.

And doing so will have the ancillary benefits of enhancing economic and productivity growth. An increase in annual European defense spending from 2 percent to 3.5 percent of GDP could lift GDP by 0.9 percent to 1.5 percent a year, according to the Kiel Institute, and every 1 percent GDP increase in defense spending can increase long-term productivity by 0.25 percent. But that’s only if Europe spends domestically and cohesively, rather than across a fragmented landscape of overlapping national programs.

But perhaps most important—and urgent—is boosting Europe’s own economic competitiveness. Let’s face it: Europe’s economic engine is puttering, not purring. The United States increased real GDP by nearly 25 percent between 2015 and 2024 compared to Europe’s 15 percent, and Europe is projected to grow roughly 1 percent lower than the United States in 2026 and 0.6 percent lower in 2027. This disappointing picture is largely due to lingering internal barriers within the single market—which the International Monetary Fund estimates are equivalent to a 44 percent tariff on intra-EU trade in goods and 110 percent on services—and the lack of integrated and vibrant capital markets that can fund start-ups and scale innovation.

Unlocking this opportunity will be hard. Mario Draghi meticulously laid out the roadmap in his 2024 competitiveness report, but implementing his recommendations—on everything from creating more pan-European company champions to coordinated industrial policy to harmonizing bankruptcy laws—have been excruciatingly slow. Only 11 percent were completed as of September 2025, one year after the release of his report.

Yet this competitiveness agenda is perhaps the most important item on Europe’s plate. Bending the productivity and growth curve upward will give Europe sufficient weight to pursue its own priorities on the global stage, allowing it to push back against China—or even a bullying United States—by arming the continent with more economic leverage. It will also help to keep the populists at bay through the salve of rising economic well-being.

Geoeconomic vulnerability has also led to a halting and disorganized approach to China, which is perhaps Europe’s biggest long-term external economic challenge. Over the past decade, China has flipped the script as it’s steadily climbed up the sophistication curve in industry after industry, with exports growing and imports flatlining: China went from a 100-billion-euro net surplus with Europe in 2014 to around 300 billion euros in 2024, peaking at 400 billion euros in 2022. As China has eaten away market share in core European industries like autos, machinery, and chemicals, the EU has done a woeful job putting up sufficient tariffs and other protections to balance out China’s own subsidization of these sectors—in part due to the ability of Beijing to successfully play member states off of one another with the promise of investment and threats of duties. Unless Europe develops a cohesive strategy to stand up to China to protect its own markets, China’s trade surplus will only grow and the lifeblood of Europe’s economy will continue to drain.

Former European Central Bank President Mario Draghi addresses the audience during a conference titled “One Year After the Draghi Report” at the EU Charlemagne building in Brussels on Sept. 16, 2025. Omar Havana/Getty Images

A more complicated question is how much Europe should reasonably de-risk from a post-Trump United States. Spending more and cohesively on defense is a given, but should Europe embark on a long-term and costly endeavor to build parallel systems for space-based intelligence, surveillance, and reconnaissance rather than depend on Washington? Similarly, how realistic is the drive toward technology sovereignty and the development of European champions in areas like cloud computing, where the United States has a near insuperable advantage? Unfortunately, Marsh leaves these important questions unasked and unanswered.

The good news for Europe is that becoming a better and more helpful ally to the United States over the long run, establishing more geopolitical independence, and standing up to China and a revanchist Russia all require the same general playbook: breaking down internal market barriers, making more progress on capital markets union, establishing a robust economic security framework, and creating an independent and cohesive defense capability. Uniquely to Europe, these reforms present a well-understood—albeit politically challenging—opportunity to supercharge growth. No other major market—including the United States—has such easily identifiable economic boosters available.

In short, opportunity beckons for Europe and the question is not whether the continent can survive; it’s whether Europeans can muster the political will and urgency to meet the moment.