There are moments when history stops whispering and begins shouting. In this column, I’ve referred to them as inflection points. Europe, once again, is confronting one of these moments, when maintaining relevance requires a course correction.
Speaking this week against the backdrop of what he declared the “now defunct” post-World War II global order—“It’s dead,” he added—Mario Draghi unsentimentally appealed for European federalism. His words didn’t express federalism as the philosophical aspiration it has long been, but as an urgent necessity brought on by the behavior of the world’s two great powers: China and the United States.
“We face a United States that, at least in its current posture, emphasizes the costs it has borne while ignoring the benefits it has reaped” through global leadership, said Draghi, the former European Central Bank (ECB) chief and Italian prime minister, in a speech worth watching and reading in its entirety.
The United States “is imposing tariffs on Europe, threatening our territorial interests, and making clear for the first time that it sees European political fragmentation in its interests,” he said. “We face a China that controls critical nodes in global supply chains and is willing to exploit that leverage, flooding markets, withholding critical inputs, forcing others to bear the cost of its own imbalances. This is a future in which Europe risks becoming subordinated, divided, and de-industrialized at once. And a Europe that cannot defend its interests will not preserve its values for long.”
Draghi’s speech, delivered on Monday at the Belgian university KU Leuven, builds upon Canadian Prime Minister Mark Carney’s address to the World Economic Forum in Davos last month. Carney called upon “middle powers” to unite in confronting a “rupture” in the international rules-based order, which he argued is being replaced by great power rivalry where the United States and China wield economic leverage as a tool for coercion.
The contrast with Canada, Draghi seemed to be saying, is that Europe has the wherewithal to become a great power. “Of all those now caught between the United States and China,” Draghi said, “Europeans alone have the option to become a genuine power themselves. So, we must decide. Do we remain merely a large market, subject to the priorities of others? Or do we take the steps necessary to become one power?”
Saving the euro
The role of European oracle is familiar for Draghi. The last time Europe faced an existential threat, he also stepped forward with a megaphone—though in that case it was to take on an economic threat rather than a geopolitical one.
In July 2012, the eurozone debt crisis threatened to unravel the European currency union that had come into being in 1999. Borrowing costs soared for Spain and Italy, amid growing fears that a disorderly Greek exit from the currency union would undermine market confidence in the euro’s survival. Then ECB President Draghi delivered a landmark speech on July 26 in London, pledging that he was ready to do “whatever it takes to preserve the euro.” It was a historic declaration from Europe’s central banker that the European Union was ready to rise to the economic challenge it was confronting as a sovereign monetary power, even if its political and security structures were far less advanced. Markets believed him, and the euro survived.
Fourteen years later, and no longer in a leadership role, Draghi again delivered a clarion call only a former leader of his stature can muster. His warning: Europe lacks the institutional wiring to rise to the geopolitical and geoeconomic challenges posed by the United States and China. It must either federalize itself or bear the consequences of not doing so. The US-led, post-Cold War order that sheltered Europe—with American security guarantees and relatively open trade—is eroding. Russia is threatening European security, and China is undermining Europe’s manufacturing base. The United States, for the moment, has grown more transactional.
Draghi provided his audience with plenty of evidence of European potential. As of 2023 the European Union was the world’s largest exporter and importer of goods and services, and the largest trading partner for more than seventy countries. It makes half the world’s commercial aircraft and 100 percent of the ultraviolet lithography required to produce advanced semiconductor chips.
Wielding Europe’s power
That said, added Draghi, “Power requires Europe to move from confederation to federation.” Where Europe has come together on trade, competition, the single market, and monetary policy, it negotiates and is respected as a power. Its newest trade deals with South America and India underscore its global heft. Where Europe hasn’t come together—on defense, foreign policy, and industrial policy—it is “treated as a loose assembly of middle-sized states to be divided and dealt with accordingly,” Draghi observed.
As an example of this power in action, Draghi referenced the recent showdown over Greenland, in which US President Donald Trump backed down from his threats to take the island. “The decision to resist rather than accommodate required Europe to carry out a genuine strategic assessment, to map our leverage, identify our tools, and think through the consequences of escalation,” Draghi said. “And by standing together in the face of a direct threat, Europeans discovered a solidarity that had previously seemed out of reach.”
The stated mission of the Atlantic Council, which I lead, is to “shape the global future together” alongside partners and allies. It’s a role I still believe most Americans embrace—even if it is now accompanied by a tougher cost-benefit analysis. Leading the global order has involved costs for the United States but also shared gains and benefits, not least of which have included, as Draghi argued, the dollar as a reserve currency and “unquestioned influence in all domains.”
At the same time, Draghi joins a growing chorus of European intellectuals who are not willing to bet their future on nostalgia about the country whose security embrace over the last eighty years allowed them to develop as an economic union, even as Europe has remained politically fragmented. “The old divisions that paralyzed us have been overtaken by a common threat,” he said. “As we act together, we will rediscover something that has long been dormant: our pride, our self-confidence, our belief in our future.”
Draghi must know that his speech, given as he received an honorary doctorate, won’t have the historic impact of his euro intervention of 2012. Still, he hopes for what he calls a “pragmatic federalism”—one where, as was the case with the euro, states opt in to combine forces on issues such as energy, technology, external policy, and defense. “Some may delude themselves that the world hasn’t really changed,” he said. “We are all in the position of vulnerability, whether we see it yet or not.”
Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on X @FredKempe.
This edition is part of Frederick Kempe’s Inflection Points newsletter, a column of dispatches from a world in transition. To receive this newsletter throughout the week, sign up here
Further reading
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Image: Former Italian Prime Minister Mario Draghi pictured during the Patron saint's day celebrations with the procession of the togati and the ceremonial awarding of six honorary doctorates at KU Leuven, Monday February, 2, 2026, in Leuven, Belgium. After receiving the honorary degree, Draghi spoke about federalizing Europe. BELGA PHOTO / ELIAS ROM.
