Europe is in the streets. From Paris to Brussels, Milan to Lisbon, hundreds of thousands of citizens are protesting rising living costs, stagnant wages, unaffordable housing and deteriorating public services. In France, demonstrations have descended into burning barricades, looted businesses, and attacks on public buildings. Elsewhere, students, workers and frustrated families are demanding that their governments deliver the prosperity and security they have long promised. Most protesters are peaceful, but the unrest reflects a growing anxiety that Europe’s economic and social model is no longer delivering.
The immediate grievances vary, but the underlying problem is more profound: too many European economies have become better at protecting yesterday’s arrangements than creating tomorrow’s opportunities. Excessive regulation, rigid labor structures, fragmented capital markets, and slow decision-making constrain the growth necessary to sustain Europe’s generous social promises. Europe has not run out of talent. It has made it unnecessarily difficult for talent to flourish.
Having served as the U.S. ambassador to the EU, I have heard this firsthand from executives running the American operations of major European companies, particularly in Silicon Valley. Their message is remarkably consistent: they simply cannot innovate in Europe the way they can in the United States. These are Europeans describing the limitations of their own economic environment. They come to America because our ecosystem allows them to move faster, attract capital, take risks, recruit talent, and turn promising ideas into commercially successful businesses.
Think about the implications. Europe has extraordinary universities, brilliant engineers, world-class scientists, and sophisticated corporations. Yet many of those same corporations look to America when they want to push the boundaries of innovation. The problem is not imagination. It is an economic and regulatory structure that too often suffocates imagination before it can become commercial reality.
There is another uncomfortable dimension to Europe’s predicament. For decades, the United States provided the military security umbrella under which European governments could devote comparatively modest resources to their own defense. While American taxpayers financed enormous military capabilities, many European countries concentrated more of their resources on generous pensions, health care, social benefits, and other domestic priorities.
Imagine if European governments had been required to spend 4% or 5% of GDP on defense throughout the past three decades. Would their social safety nets look anything like they do today? Perhaps Europeans would still have chosen extensive benefits, shorter workweeks and lengthy vacations. But those arrangements would have required far more difficult fiscal choices involving taxes, borrowing, spending and economic growth.
American military power did not create Europe’s welfare state, but it helped make that welfare state easier to afford.
The American security guarantee may also have distorted European perceptions of the threats themselves. When someone else bears much of the cost of protecting you, it becomes easier to discount the danger. Why acknowledge the full threat posed by Russia if doing so means telling voters they must sacrifice cherished benefits to purchase tanks, aircraft and missiles? Far easier for Europeans to conclude that Washington is exaggerating the danger, let America spend the money, and enjoy another three-hour lunch.
Poland and the Baltic states have generally viewed Russia differently. But across much of Western Europe, American protection made strategic complacency easier to sustain.
Now the defense bill is coming due. President Trump has pressed NATO allies to assume greater responsibility for their own security, and European governments have committed to substantially higher defense spending. Those commitments arrive just as their economies struggle to generate the growth necessary to finance them.
Europe needs an immediate regulatory reset, more integrated capital markets, flexible labor arrangements, faster permitting, affordable energy and an environment in which entrepreneurs can build global companies without crossing the Atlantic. Estonia’s digital government, Denmark’s labor flexibility, Ireland’s technology investment and Poland’s industrial development offer useful examples. What Europe lacks is not another commission or another report. It needs political leaders willing to confront the bureaucracies, vested interests and institutional inertia that prevent meaningful reform.
Which brings us to America.
