Europe needs to adapt or it will get left behind

Amid an unsettled geopolitical and geoeconomic landscape, Europe stands at a crossroads.

The strategic debate currently taking place in many of the continent’s capitals is largely focused on whether to continue down the road of interdependence with foreign partners or to forge a new path of greater strategic autonomy. But to be truly secure today and remain well-positioned for tomorrow, Europe needs to opt for a middle ground.

Embracing interconnectedness where prudent while building autonomy where it can, this is an approach that can be called “strategic interdependence.”

Today, the imbalanced strategic status quo has been most salient when it comes to security. The war on Ukraine was a wake-up call, exposing Europe’s overreliance on the transatlantic partnership. But this realization doesn’t mean the European Union (EU) should prioritize autonomy over alliances. US nuclear deterrence and defence partnerships, including NATO, are indispensable and Europe cannot take this defence arrangement for granted.

That’s why the bloc must become a stronger pillar within NATO – both for its own sake and for its partners. Tactical commitments to the transatlantic alliance need to be coupled with stronger European strategic structures. And one possible way to do this would be to set up an informal European Security Council, one comprising representatives from the Council of the EU and the European Commission, to streamline defence coordination and enable swift, decisive action.

Meanwhile, on energy, Europe’s reliance on Russian gas revealed the perils of depending on a single provider. Before the war on Ukraine, over 40% of Europe’s natural gas imports came from Russia, which created a critical vulnerability. The EU has responded to the crisis by diversifying its energy imports, significantly increasing its liquefied natural gas supplies. But while this is a prudent approach in the near term, long-term resilience requires the continent to become more self-reliant on green sources.

This means Europe should continue energy partnerships with allies for short-term needs but it must also address its overreliance on external sources for green components. Instead of competing in mature technologies like solar panels, where China controls over 80% of global manufacturing, the EU should be targeting sectors where it can gain a competitive advantage.

Emerging fields such as battery tech, where innovation is still up for grabs, are one possibility here. Moreover, to ensure stability in its green transition, a Critical Raw Materials Reserve akin to the US Strategic Petroleum Reserve could act as a buffer against supply-chain shocks.

When it comes to technology, Europe is losing its edge as well: 80% of semiconductor suppliers are located outside the bloc, while US and Chinese firms are dominating artificial intelligence, quantum computing and advanced chips. To turn this around, the EU must overhaul its regulatory landscape by cutting red tape, eliminating barriers and setting up one-stop shops to simplify digital compliance for businesses.

Additionally, by introducing de-risking tools, such as loan guarantee programmes that will facilitate investment, the bloc needs to ensure capital is flowing to critical industries. To be clear, this isn’t about a lack of money: The EU boasts a 2.5% of gross domestic product (GDP) annual current-account surplus, which it invests abroad.

Alliances with countries around the world will be essential, including on trade where Europe must pursue an active agenda. The EU’s single market, representing 15% of global GDP and 450 million consumers, is its economic trump card and Europe should use this to secure needed critical resources for its digital and green industries.

Crucially, striking the right strategic balance will also necessitate human capital. Europe’s demographic clock is ticking and by 2050, the bloc’s working-age population will shrink by 20%, with countries like Germany facing a gap of 7 million workers by 2035. That’s why migration policies need to be strategic and better tailored to labour-market needs. Public support hinges on reframing migration as an opportunity – a driver of innovation, labour market renewal and sustainable growth for Europe’s ageing economies.

Strategic interdependence is more than a policy framework, it’s a mindset – one that Europe’s leaders must embrace if they are to navigate the world as it is, not as they wish it to be. By investing in defence, accelerating the green transition, fostering innovation, deepening global trade ties and reforming migration policies, they can secure Europe’s place as a global leader. For the alternative is a fragmented, stagnant bloc, sidelined in great-power rivalries.

The choice is clear: Adapt or get left behind.