Europe. All in.

Europe has long been more than just a geographic region. It is a political, economic, and cultural project built on peace, prosperity, and shared values. But that project is under growing pressure. Internally, growth is stagnating, populations are aging, and political polarization is rising. Externally, a more fragmented and confrontational global order is challenging Europe’s ability to influence events and shape standards. And while others act, Europe too often hesitates.

Yet it would be premature – and mistaken – to write off Europe. The region still holds powerful assets: a large, affluent single market, world-class research and innovation capacity, a strong foundation in climate technology and environmental policy, and resilient democratic institutions.

If it can harness these assets with more strategic clarity and political will, the continent does not have to be a passive player in a reshaped global order. On the contrary, it can emerge as a resilient, adaptive, and influential force – if we are willing to collectively go ALL IN.!

A changing position in the global economy

Europe stands at a critical juncture. Once seen as the world’s most successful peace project and a model for regional integration, Europe finds itself under mounting internal and external pressure. At first glance, both the European Union and individual European nations appear heavyweights in global affairs: the continent is home to over 500 million people, with a strong industrial tradition, vibrant cities, and leading academic institutions. But compared to the rest of the world, Europe is gradually losing ground.

Nowhere is this more visible than in its declining share of global economic output. Prior to the global financial crisis of 2007, the EU accounted for roughly 25% of global GDP. Today, that share has dropped to just under 18% – and the trend shows no signs of reversal.

This erosion of relative economic weight is not merely a statistical observation; it symbolizes a broader loss of competitiveness, influence, and strategic coherence. While the global economy has expanded – driven by the rapid rise of emerging markets, above all China – Europe has struggled with stagnating productivity, limited scale in digital and AI industries, and an aging demographic profile that constrains innovation and consumption. The EU's internal market also remains fragmented in crucial areas such as finance, energy, and digital services, preventing the continent from fully leveraging its potential.

Underinvestment leaves Europe exposed

Compounding this are growing geopolitical vulnerabilities. Russia’s war against Ukraine has forced Europe to confront its long-standing underinvestment in security and defense. While European nations close to Russia have significantly increased their military budgets and are now allocating 2% of GDP to defense, the region as a whole remains marked by decades of dependency – on US security guarantees and Russian energy supplies.

These dependencies have left the Union exposed. The resulting reorientation – toward military deterrence, energy diversification, and strategic autonomy – is necessary but costly.

Yet despite these headwinds, it would be wrong to write off Europe. The continent holds several strategic assets that, if mobilized effectively, could allow it to regain relevance and resilience in a rapidly changing global order.

Structural strengths in a shifting global order

Start with innovation. A look at global innovation rankings shows that European economies continue to punch above their weight. Countries like Switzerland, Sweden, Finland, Denmark, and Belgium consistently rank among the world’s top innovation economies, supported by strong research institutions, high R&D investment, and vibrant public-private ecosystems. While Europe still lags behind the US and China in sectors such as artificial intelligence and semiconductors, it is a global leader in industrial automation, life sciences, and green technologies.

Equally important is Europe’s strong institutional foundation. The World Bank’s World Governance Indicators (WGI) show that European countries dominate the top rankings in the Rule of Law category. This is more than a matter of legal niceties – it is the foundation of a high degree of political stability, investor protection, transparent public administration, and social trust.

In an age of democratic decline and institutional decay, the European nations’ governance model remains a major competitive advantage. It attracts capital, talent, and companies looking for a reliable operating environment.

Moreover, the EU remains the world’s largest single market, offering scale, regulatory certainty, and purchasing power. Its standards often serve as global benchmarks, from data privacy (GDPR) to sustainability, and food safety. This “Brussels effect” allows Europe to shape international norms even in areas where its market share is shrinking. For companies and countries around the world, aligning with EU rules is often a prerequisite for market access. That soft power is hard to replicate.

Commitment to sustainability and democracy

Another underappreciated asset is Europe’s leadership in climate technology and environmental policy. The EU is not just setting ambitious climate goals; it is building the tools and industries to get there. From circular economy models to carbon pricing mechanisms, Europe is at the forefront of the green transition. This also provides leverage to regain its technological edge in areas where the continent is lagging, for example in the battery sector.

Finally, Europe still benefits from a deeply rooted commitment to democratic values, pluralism, and individual rights. These principles are strategic as well as normative. At a time of growing global authoritarianism, Europe’s open societies remain attractive, particularly to the next generation of entrepreneurs, researchers, and skilled migrants.

How Roland Berger can help

The priorities we’ve laid out are not just a passive call to action towards policymakers. They reflect areas in which we partner with businesses, governments and others who are ready to shape what comes next.

We help turn clean tech from pilot to scale, connect capital with long-term industrial strategy, accelerate digital readiness and make regulation work in practice. We support leaders who want to act rather than wait. And we stand behind our call for collective action by putting it into practice ourselves.

Roland Berger is a global consultancy with European roots. We understand this continent’s complexity and believe in its potential. And we’re ready to go all in. Are you?