Rise Up, Europe!

Tomas Pueyo from Uncharted Territories <unchartedterritories@substack.com>

Thu, Mar 20, 2025 at 9:01 AM

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Rise Up, Europe!

The Five Beliefs That Cripple a Continent

Tomas Pueyo

Mar 20

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Europe could be the world’s biggest superpower, but today, it’s a shadow of what it could be.

In the early 1900s, European powers controlled half the world. Then, they opened Pandora’s box and burned all that wealth in not one, but two orgies of destruction. Europe became afraid of itself. The EU grew from the ashes of the second one, WW2, yelling: Never again! And to this day, this has been true. It has never again been a great power.

Europeans have been lulled into a dream. We’ve been treated like other superpowers’ bitch. We’ve learned to submit like a lapdog. That was acceptable for a few decades, while our master treated us well and nobody else could threaten us. We saw the food on the table, our cozy bed at night, our holidays at the beach, and thought life was great. But the world is a different place now, a more dangerous one. Our nominal master is weaker, older, and more selfish. It’s time for Europe to wake up from this dream, unshackle itself, and claim its place.

1. Times Are Changing

The US and the USSR used Europe as their playground during the Cold War. Once the Russian threat evaporated, it remained in a convenient lull. It benefited from:

Cheap military protection from the US
Cheap energy from Russia
Cheap manufacturing and a huge growing market from China

But the chicken came home to roost. Now:

Trump’s US wields its military power as a wildcard to impose his will on the continent
Putin’s Russia wielded its energy power to straightjacket Europe into submission
China has used its economic might to steal technologies and is in the middle of destroying Europe’s industries, most notably cars, batteries, and solar panels

Hopefully, the madness of Trump will only last four years. But four years is a very long time. Anything can happen. European secret services believe Russia will test the union of NATO by attacking one of its countries by 2030. Europe can’t anymore for Russia and the US to decide its fate.

Similarly, China is decimating European industries, and nowhere is this truer than in cars.

China is using its dominance in batteries to leapfrog internal combustion engine (ICE) cars and become the #1 exporter of electric cars in the world, displacing European manufacturers.

China controls the world’s manufacturing base and dozens of rare resources. What do you think will happen when it invades Taiwan? Will Europe have any leverage to protect its brotherly democracy?

This whole geopolitical nightmare is happening as Europeans grow old.

And the dependency ratio is one of the worst in the world:

It’s one of the reasons why Europe spends so much on its pensions:

And therefore taxes:

When government spending is 60% of GDP, you know you have a problem. It means the majority of each private sector worker’s income is taxed by the government. How dynamic do you think an economy like that can be?

It doesn’t help when your government is hell-bent on overregulating. European parliamentarians pat themselves on the back for disastrous regulations, like the Cookie Law that forces Europeans to accept cookies on every site, the General Data Protection Regulation (GDPR) law that forces an unbelievable burden of privacy protection on companies,¹ the AI law that shackles homegrown AI companies, and the bottle cap law that makes us miserable every day of our lives while doing nothing for the environment.

Europe has mandated that all plastic bottle caps be attached to bottles. It makes drinking from the bottle or serving from them with just one hand wildly annoying. And it doesn’t do much. Most plastic in the environment doesn’t end up there because of European use, but because of Asian use. As for bottle caps, they sometimes end up in nature, but what, are we supposed to forbid everything that can end up in nature? Or should we better educate the population and clean up nature?

These are just a handful of the reasons why Europe is so diminished. There are many more, from the closure of nuclear reactors to restrictions on new gas fields, 35h workweeks, lights switching off at 6pm in companies, cross-country trade requirements making it a massive burden for companies to operate across the entire continent,² weak foreign policy, stupid subsidies and trade rules, overbearing regulation…

That’s why Europe is a shadow of its former self. We are weak. We don't defend ourselves. Our economy is dormant. We are aging. We are questioning our values, who we are. We are in the midst of an existential crisis. But it doesn’t need to be.

2. Europe Could Be the World’s Greatest Superpower

Europe is comparable in size to the world’s other superpowers.

Source

It has a bigger population than the US, and a much bigger one than Russia:

It has a comparable GDP to those of the US or China:

Back in 2023, before its recent surge in military spending, it already spent more than China on defense and dwarfed Russia.

Europe created democracy. It was lucky to develop faster than most regions after the invention of the printing press and birthed the Enlightenment and the Industrial Revolution. With this power, it conquered half the world.

Europe proved that it has the spirit and the people to do great things. And I don’t just mean in the past. We’ve proven it very recently. Our dependence on Russian gas is nearly gone:

Import from Russia declined from over 150 billion cubic meters (bcm) in 2021 to less than 43 bcm in 2023. This was mainly compensated by a growing share from other partners. Over the same period, import from the US grew from 18.9 bcm to 56.2 bcm, import from Norway grew from 79.5 bcm to 87.7,and import from other partners increased from 41.6 bcm to 62 bcm.

And in the case of Germany, it completely broke free.

Only some EU countries couldn’t quickly sever their dependence on Russian gas—generally countries that are close to Russia, either physically, politically, or both.

As I write this, Germany’s president-elect Merz is working on a constitutional amendment to allow for unlimited defense spending. Merz’s CDU party has agreed with the center-left SPD and the Greens a gargantuan €1 Trillion to spend on defense, defense-related infrastructure, and green transition.

Germany is not the only country doing its share. Most of the countries bordering Russia have increased their military spending massively.

Poland will reach 4.7% of its GDP in 2025, which will put it close to Russia’s 6.3%. Similarly, the Baltic countries (Estonia, Latvia, Lithuania, Finland) have dramatically increased their military spend.

Poland is now considering developing its own nuclear bombs. In the meantime, it’s hoping that France will pledge to protect it with its nuclear arsenal.

France is the only NATO ally that decided to build its own homegrown nuclear bombs, precisely for situations like this one, when it can no longer depend on the US. It is now considering extending its nuclear umbrella to other European countries.

This doesn’t only apply to nuclear weapons. France has approved six new nuclear reactors, and so have several other EU countries: Poland, Czechia, Sweden, Romania, the Netherlands, and maybe even Italy.

When there’s a will, there’s a way.
So what should the EU will in order to change and reclaim superpower status?

3. What Should Europe Do?

Europe needs to (a) unite and spend more on its military. These will cost money, so it will also need to (b) become more productive.

a. Unite & Spend More on the Military

Make English Co-Official

It’s impossible to unite without a common language: A common language reduces costs, increases revenue, and creates unity of ideas.

When I worked in Internet companies, we faced two obstacles when deciding in which country to open next: regulation and language.

Invariably, we first opened up in the UK, Ireland, the Netherlands, Malta, and Nordic countries, for a simple reason: In these countries, nearly everyone speaks English. Other countries required not just a translation to the website, but also a local team of salespeople and customer service representatives. The logistics and cost of hiring all these people for the dozens of EU languages was obscene. So we simply didn’t do it.

If all Europeans spoke English, every company on the continent would be more likely to go to all other countries, improving competition and productivity, while reducing costs. We need this to be true in all of Europe, and the best way to achieve it is by making English the co-official language across the continent, along with all the requirements that go with it: Classes in both languages (English and local) at school and in university, official documents in both languages, top politicians who must speak both…

This would have the additional benefit of nation-building, which would strengthen the country. Why should Spaniards spend money on their military to fend off the Russians thousands of kilometers away? They might, if they believed that an attack on Poland is an attack on themselves. But before we are one country, we need to feel like one nation. And how does one build a nation? The EU has all the standard nationalist paraphernalia: a capital, a flag, a hymn… But it’s missing the obvious one: a common language!

European politicians are bullshitting their citizens. They all speak English with each other. Any European who works at a multinational company speaks English. Every day, more and more Europeans learn to speak English. English is the future; everybody knows it.

Not only that, but if we don’t all speak the same language, we can’t understand each other, we can’t exchange ideas with each other, we can’t start to feel like brothers and sisters. A common language is at the heart of every nation, and the only candidate is English.

We should make it the co-official language of every European country.

This is an uncomfortable truth for many Europeans:
People are not ready to make English a co-official language. It would be political suicide.
But what will happen to our beloved X language?

This is burying one’s head in the sand! We all pretend like reality is not happening. It is already a done deal: English will be the lingua franca in Europe, no matter what we do. So let’s accelerate and facilitate the process.

Unify the Military

Maintaining separate militaries is a strength in a way: It diversifies the risk of failure. 27 different approaches means at least some will probably be great.

But it comes at a huge cost: less coordination, more overlaps, duplication of costs, less standardization, lower economies of scale… All in all, it would make more sense for the EU military to be unified.

And there’s support for it!

Historically, this is what forms countries: A shared battle against a shared enemy. Today, we have that in Russia. It’s time to leverage it to build our nation.³

Joint Procurement

Europe is big and buys a ton of stuff, but when its purchases are divided by 27 (countries), each one has much less negotiating power than when considered as a whole.

For instance, we are still not joining forces in the defence industry to help our companies to integrate and reach scale. European collaborative procurement accounted for less than a fifth of spending on defence equipment procurement in 2022. We also do not favour competitive European defence companies. Between mid-2022 and mid-2023, 78% of total procurement spending went to non-EU suppliers, out of which 63% went to the US.—Mario Draghi, The Future of European Competitiveness, 2024.

Of course, the military is not the only thing that can benefit from joint procurement. Natural gas is another example: The EU is the world’s biggest consumer of natural gas, but each country buys it independently, so the cost ends up being much higher.

This leads us to productivity.

b. Productivity

For a big military in particular, and to become a great superpower in general, you need people, technology, and money.

Population is hard to move: We don’t yet know how to influence fertility, and Europe’s flows of immigration might have been too intense recently.⁴

But both money and technology come from productivity. So the only way for Europe to become richer and more powerful is to be more productive.

Unfortunately, European productivity has been lagging over the last few decades.

By the end of the 20th century, European labor productivity had nearly caught up with America’s. Since then, it’s been going downhill.

So how do we improve the EU’s productivity?

Lower Taxes

The tax rates in Europe are among the highest in the world. I know many entrepreneurs who left Europe to build their companies abroad because of these taxes. In fact, many very successful US entrepreneurs are European emigrants, like the Collison Brothers, founders of the $100B company Stripe.⁵

To lower taxes, we need to take a good look at our current spending and make some sacrifices. If it were easy, we would have done it already. And of all costs, one stands out.

Increase Retirement Age

Retirement benefits are frequently the biggest ticket item in European budgets. We could easily increase the retirement age to 72. This is doubly good for the state’s coffers: During those additional years of people’s working lives, they would produce income (and taxes) for the state rather than consume funds, and that would quickly revitalize the budget. I will discuss this more in another article.

Make It Easier to Fire

I’ve witnessed 8 layoffs at the companies I’ve worked at, most of them in the US, the rest in Europe.

In the US, you can make a decision to lay off 10% of the workforce, execute it the day after, and start focusing on the future the day after that. Within a week, everybody was back to work.

In Europe, we had to first announce it to the Unions, then the negotiation process started, the decision was made, then we needed time to let people know… In some EU countries, we couldn’t even pick who to keep! We had to follow rules like seniority.

This is madness. First, it’s much more expensive. Second, you waste months or even years dealing with that, rather than the business. Maybe this makes sense for very established behemoths, but this is the death of Internet startups. As a result, most entrepreneurs simply don’t build or incorporate in Europe.

Reduce Unemployment Benefits

In the US, the day after layoffs, people were looking for a new job. In Europe: “I don’t know what I’m going to do. We will see. I’ll take a few months off, then see what happens.”

This means that people at their prime are enjoying life rather than producing. And why is that the case? Because people make a lot of money for a very long time. In a country like Australia, I’m told unemployment benefits only reach the minimum salary, instead of being indexed to your previous employment income. This makes sense: The point of unemployment benefits is not to give you a good life, but to help you get back on your feet. Why would your hard-working compatriots have to pay with their taxes for your fun?

So I’d reduce the amount of time of unemployment benefits as well as the amount. This, like retirement benefits, would have the double whammy of less state spend on benefits and more tax income from more work.⁶

Reduce Regulatory Burdens

Mario Draghi, economist, former Prime Minister of Italy, and former President of the European Central Bank, put together a report on how to make Europe more competitive. One of his strongest recommendations is to stop overregulating:

We claim to favour innovation, but we continue to add regulatory burdens onto European companies, which are especially costly for SMEs [Small and Medium Enterprises] and self-defeating for those in the digital sectors. More than half of SMEs in Europe flag regulatory obstacles and the administrative burden as their greatest challenge.

What are those obstacles and burdens? For example, big companies are more productive than small ones, yet the EU keeps companies small:

These include the high cost of adhering to heterogenous national regulations, the high cost of tax compliance, and the high cost of complying with regulations that apply once companies reach a particular size. As a result, the EU has proportionally fewer small and medium-sized companies than the US and proportionally more micro companies.

Also, the tech sector should be the least regulated, to encourage more innovation, but it’s among the most:

The EU now has around 100 tech-focused laws and over 270 regulators active in digital networks across all Member States. Many EU laws take a precautionary approach, dictating specific business practices ex ante to avert potential risks ex post. For example, the AI Act imposes additional regulatory requirements on general purpose AI models that exceed a predefined threshold of computational power – a threshold which some state-of-the-art models already exceed. Digital companies are deterred from doing business across the EU via subsidiaries, as they face heterogeneous requirements, a proliferation of regulatory agencies. Limitations on data storing and processing create high compliance costs and hinder the creation of large, integrated data sets for training AI models. This fragmentation puts EU companies at a disadvantage relative to the US, which relies on the private sector to build vast data sets, and China, which can leverage its central institutions for data aggregation. Finally, multiple different national rules in public procurement generate high ongoing costs for cloud providers.

So we should scrap the regulations mentioned above (Cookie Law, GDPR, bottle caps, AI…) and many more along those lines.

Support Startups

The beginning of a company’s life is delicate and precious. The more we can support and protect new companies, the stronger they will be. Pieter Levels had a list of good recommendations for Draghi’s report:

Minimum revenue cut offs for current and new regulation: For example, regulations like VATMOSS, GDPR, the EU AI Act, and certain labor laws should only apply after a certain threshold of revenue, like €10M.⁷
Simplify starting a pan-EU business with an EU-wide Incorporation (Inc.) business form
Be able to start an EU business fully online, no physical offices, notaries, lawyers, etc. The EU government taxes and bookkeeping of this business should also be fully online in an EU portal/dashboard.
0% corporate tax for the first 3 years of any new business. Countries like Singapore have successfully attracted new businesses from around the world by giving them a massive tax discount during the first 3 years of business. Because it knows that the first 3 years are the most difficult time for a business: figuring out what product it makes and if there’s a market for it. That takes pressure off of startups and business founders so they can focus on innovating and creating a great product.
Change tax on stock options: Don't tax when a stock option is exercised, but tax it when the stock is sold, like in the US.⁸
Teach tech/coding/AI topics in all schools and unis. We need more technology experts!

Protect Infant Industries

This is especially important, because the biggest gap between US and EU productivity is in the tech sector: The US has created lots of very successful tech companies, and the EU has created very few: The US stock market is dominated by companies like Google/Alphabet, Facebook/Meta, Amazon, and Netflix, while Europe has no such companies.

The only other country that has many of them is China,⁹ because China simply banned these competing companies from operating there.

I’m pretty sure that within two months of banning Google or Facebook, Europe would have good alternatives. It might be too late for these (?), but it’s not for AI, which is poised to transform the economy. Europe’s AI sector would develop much more strongly if AI companies were forced to be owned by Europeans and based in Europe. This infant industry protection is nothing new: It’s how Asian countries became rich.

Note that the measure of success for these companies would always be their level of exports. Without export discipline, this type of company just becomes a monopolist leech.

Reduce Energy Prices

Many core industries use lots of energy—steel, aluminium, cement, glass, chemicals, fertilizer, paper, textiles, AI… For each of these, high energy costs are a catastrophe. Yet EU energy costs are through the roof:

We can see the impact high energy costs have had on industrial growth:

The more energy an industry consumes, the more it shrank between 2021 and 2024.

Without cheaper energy, we can’t win.

Reopening closed nuclear reactors is a no-brainer. Continuing the green transition is important too, as wind and solar are already the cheapest sources of energy. But during the transition, we need cheap oil and gas. Luckily, Europe has some of each. Norway is a big oil supplier, and the UK and Netherlands used to be big suppliers of gas. Alas, they both reduced their production due to environmental concerns. Other countries, like France, Poland, Austria, and many others could have developed their sources further. Many European countries have large shale gas reserves that are underdeveloped because of environmental opposition.

And if you are concerned about the environment, just look at this:

Whatever policy decisions the EU makes regarding CO₂ will barely scratch the surface of global warming. So it’s important to continue fighting for the energy transition, but it can’t be at the cost of Europe’s power.

The other obvious way to reduce energy prices is to reduce energy taxes. In Europe, they are among the highest in the world.

Increasing the production of gas would improve the EU’s economy and its strategic independence. Europe should develop its natural gas resources.

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Takeaways

The point of this article is not to give a point by point recommendation of everything the EU should change. Draghi’s report has many interesting ones, and I wrote about a few in this article a couple of years back, like focusing more on what Europeans have in common than on their differences, putting universal human rights at the center of European discourse, unifying the military, or unifying foreign policy. What other European problems do you know, and suggestions to solve them?

[Salon] Rise Up, Europe!