Europe’s Existential Litmus Test: From Prosperity Legacy to Prosperity Renewal

Introduction

The transition from Europe’s inherited prosperity model to a renewed prosperity model constitutes an existential litmus test because it asks whether Europe can preserve the moral substance of its post-war social contract under conditions that have rendered that contract materially, geopolitically, and institutionally fragile. The issue is not merely whether Europe can grow faster, innovate more efficiently, or decarbonise more cheaply. The deeper question is whether the European political form can still justify itself: whether it can reconcile market dynamism with social protection, ecological constraint with industrial renewal, and democratic legitimacy with supranational governance. If the transition fails, Europe risks becoming a region of high expectations and declining capacity, where welfare promises outstrip productive foundations and political solidarity fragments into national, regional, and generational resentment. If it succeeds, the European model may demonstrate that the twenty-first-century alternative to both neoliberal market society and authoritarian state capitalism is a democratic, social, and ecological political economy.

1. The European legacy: prosperity as a moral-political settlement

The European prosperity legacy is not simply a period of economic success. It is a historically specific political settlement. After 1945, Western Europe constructed a model in which capitalist growth, social insurance, collective bargaining, public services, and democratic constitutionalism were mutually reinforcing. In Polanyi’s terms, European welfare capitalism attempted to “re-embed” the market in social norms and institutions rather than allow society to be subordinated to the market (Polanyi 1944). In Esping-Andersen’s later vocabulary, Europe’s welfare states sought varying degrees of “decommodification”: the citizen’s life chances were not to depend exclusively on market income (Esping-Andersen 1990).

This settlement had three background conditions. First, strong productivity growth and industrial catching-up made redistribution fiscally feasible. Second, favourable demographics meant a relatively large working-age population could finance pensions, health care, education, and family policy. Third, Europe operated under a geopolitical order in which the United States provided security, global trade expanded under multilateral rules, and fossil energy remained comparatively cheap. These conditions helped make the “European dream” credible: prosperity could be social, democracy could be stable, and markets could be disciplined by law.

Yet this legacy now becomes a burden if it is treated as an entitlement detached from its productive and institutional foundations. A welfare state is not only a moral commitment; it is also a fiscal and economic system. Social rights require taxable income, productive employment, technological capacity, and public legitimacy. A polity can promise social protection, but it cannot indefinitely finance it through low productivity, rising dependency ratios, external technological dependence, and high public debt. The old prosperity legacy therefore becomes politically dangerous when citizens continue to expect the outputs of the post-war settlement while the inputs that sustained it have weakened.

2. Why renewal is existential: capacity, legitimacy, and sovereignty

The transition is existential because it affects the three conditions of political survival: material capacity, normative legitimacy, and collective agency.

First, Europe’s material capacity is under strain. The Draghi report argues that Europe’s growth problem is fundamentally a productivity problem, especially in digital technologies, scale-up finance, energy costs, and industrial fragmentation (Draghi 2024). This matters philosophically because social justice is not only a distributive principle but also an institutional practice. Rawlsian justice requires stable background institutions capable of sustaining fair equality of opportunity over time (Rawls 1971). A society that lacks productive capacity cannot maintain demanding social rights without either overburdening future generations or lowering the quality of protection.

Second, Europe’s legitimacy depends on whether citizens experience the transition as fair. Scharpf’s distinction between input and output legitimacy is useful here (Scharpf 1999; 2009). Citizens must be able to see both that decisions are democratically accountable and that institutions deliver effective solutions. A green and digital transition that produces job insecurity, regional decline, unaffordable energy, or perceived technocratic imposition will not be experienced as progress. It will be experienced as dispossession. Conversely, a transition that creates quality jobs, skills, affordable clean energy, and social mobility can renew the democratic compact.

Third, Europe’s sovereignty is at stake. Sovereignty here does not mean autarky or nationalist closure. It means the capacity to choose collectively under conditions of interdependence. A Europe dependent on external suppliers for energy, critical raw materials, digital infrastructure, defence technologies, and capital-market depth cannot fully determine its own future. Letta’s argument that the Single Market was born in a smaller world is therefore central: the institutional form that once generated integration is no longer sufficient for a world of continental-scale competition, strategic industrial policy, and geopolitical fragmentation (Letta 2024).

Thus the transition is a litmus test because it reveals whether Europe is still a political project, not merely a regulatory space. A political project can transform constraints into common purposes. A regulatory space can only manage decline.

3. The contradiction: protecting social achievements while disrupting inherited structures

Europe’s dilemma is that renewal requires disruption, but the European model is built around protection. The problem is not that protection is obsolete. On the contrary, protection is more necessary in an era of automation, climate shocks, geopolitical insecurity, and demographic ageing. The problem is that protective institutions can become conservative if they mainly defend inherited sectoral positions rather than enable citizens to move securely into new forms of work, production, and citizenship.

The relevant distinction is between passive preservation and active security. Passive preservation attempts to freeze the old structure: existing firms, occupations, energy systems, pension rules, and national industrial arrangements. Active security protects persons, capabilities, and communities while allowing economic structures to change. This is close to the idea of “social investment”: welfare policy should not merely compensate for market failure after the fact, but build capabilities through education, health, childcare, lifelong learning, and labour-market transitions (Hemerijck 2013).

The political-philosophical stakes are high because transitions distribute burdens asymmetrically. Workers in carbon-intensive industry, older workers with firm-specific skills, households facing energy renovation costs, and regions dependent on legacy sectors may experience modernisation as a moral injury. A transition that tells such groups simply to adapt will produce backlash. A just transition must therefore combine decarbonisation and competitiveness with recognition, participation, and compensation. It must make clear that the object of protection is not every inherited business model, but the dignity and agency of citizens.

4. Belgium as a concentrated case of the European problem

Belgium is a particularly instructive microcosm of Europe’s existential test. It has many of Europe’s strengths: dense public institutions, high social protection, strong research capacity, a central position in European governance, and advanced industrial and logistical assets. It also has many of Europe’s vulnerabilities: fiscal pressure, ageing-related expenditure, regional labour-market divergence, complex federal governance, and tensions between competitiveness and social protection.

Belgium’s social model is substantial. Social protection expenditure reached a very high share of GDP, with old-age and sickness/health care representing the largest functions. This reflects a genuine social achievement: a state that protects citizens against life-cycle risks. Yet the same fact also reveals the fiscal stakes of renewal. If employment and productivity do not rise, Belgium’s social model becomes harder to finance without higher debt, higher taxes on labour, or reductions in benefit adequacy.

The labour-market geography of Belgium makes the issue more concrete. Flanders has a much higher employment rate than Wallonia and Brussels, while Brussels combines the symbolic role of EU capital with persistent labour-market exclusion. Belgium’s national employment target of 80% by 2029 is therefore not a technocratic benchmark; it is a test of social citizenship. A welfare state financed by too narrow a base risks dividing contributors and beneficiaries, regions and communities, insiders and outsiders.

At the same time, Belgium also shows that renewal is possible. Its research and development intensity exceeds the EU’s 3% benchmark, and institutions such as imec in Leuven, the Belgian universities, the Port of Antwerp-Bruges, and the North Sea energy ecosystem give Belgium assets relevant to semiconductor research, logistics, chemicals, hydrogen, circular economy, and offshore energy. The challenge is to connect these islands of excellence to a broader social renewal: skills, affordable housing near jobs, transport connectivity, industrial decarbonisation, and labour-market inclusion.

In this sense, Belgium does not merely illustrate Europe’s problem. It sharpens it. A prosperous, highly institutionalised, multilingual, federal welfare state must prove that complexity can be a source of democratic coordination rather than paralysis.

5. The European model between neoliberalism and authoritarian capitalism

The renewal of European prosperity is existential also because it concerns Europe’s distinctive civilisational claim. Europe does not define itself only by output, but by a form of life: democracy, social rights, rule of law, human dignity, pluralism, and ecological responsibility. The European Union’s legitimacy depends on the proposition that these commitments are not luxuries purchased after growth, but conditions for a higher form of prosperity.

This proposition is contested from two sides. The neoliberal critique argues that Europe’s social model is too costly, too regulated, and too risk-averse to compete with the United States or East Asia. The authoritarian-capitalist critique argues, more implicitly, that democratic deliberation and social rights are inefficient compared with state-directed mobilisation. Europe’s answer cannot be nostalgia. It must show that democracy can mobilise, that social justice can increase productivity, and that ecological transition can produce industrial strength.

Mazzucato’s work on mission-oriented policy is relevant here: markets do not simply discover the future; public institutions can help shape it by setting missions, coordinating investment, and socialising both risks and rewards (Mazzucato 2013; 2021). But mission policy in Europe must be democratically bounded. It cannot become technocratic dirigisme. The European model will be renewed only if citizens can see why industrial policy, climate policy, and social policy are part of one social contract.

6. What success would require

A successful prosperity renewal would require at least five interdependent transformations.

First, Europe must close the innovation and scale-up gap. Research excellence is insufficient if firms cannot grow, capital markets remain fragmented, and regulation prevents rapid diffusion. The issue is not deregulation as an ideology, but institutional simplification in the service of public purpose.

Second, Europe must make decarbonisation materially attractive. Climate policy will not sustain legitimacy if it is experienced mainly as cost. Clean energy, grid investment, building renovation, industrial electrification, and public transport must become sources of lower long-term costs and high-quality employment.

Third, Europe must treat skills as a primary institution of justice. In a knowledge economy, education and lifelong learning are not merely labour-market tools. They are conditions of equal citizenship. A worker who cannot realistically acquire new capabilities is formally free but substantively trapped.

Fourth, Europe must build fiscal and financial capacity. The investment needs identified in recent European reports cannot be met by moral exhortation. They require better capital-market integration, more European public goods, and credible national fiscal strategies. For Belgium, this means that fiscal consolidation and social investment cannot be treated as opposites: consolidation that destroys future capacity is self-defeating, but investment without fiscal credibility is politically fragile.

Fifth, Europe must renew democratic participation. A transition imposed from above will generate resistance even if its macroeconomic logic is correct. Social dialogue, regional transition plans, citizen deliberation, and transparent burden-sharing are not decorative. They are legitimacy-producing institutions.

7. Why failure would be existential

Failure would be existential because it would not merely reduce Europe’s relative income. It would undermine the European model’s claim to reconcile capitalism and democracy. The probable consequences would be cumulative.

Economically, Europe would become more dependent on external technologies, energy systems, platforms, and defence capabilities. Socially, welfare states would face sharper trade-offs between pensions, health care, education, climate investment, and defence. Politically, citizens would increasingly interpret scarcity through antagonistic categories: young against old, mobile against immobile, metropolitan against peripheral, native against migrant, North against South, Flanders against Wallonia, contributor against recipient. Institutionally, the EU would risk becoming a convenient object of blame precisely when collective European capacity is most needed.

Such fragmentation is existential because Europe is not a nation-state with a single demos capable of absorbing indefinite distributive conflict. It is a multilevel polity dependent on a fragile combination of legal authority, national consent, output performance, and shared values. If renewal fails, that combination weakens.

Conclusion

The passage from prosperity legacy to prosperity renewal is Europe’s existential litmus test because it asks whether the European model can become historical again. A legacy is something inherited; renewal is something achieved. Europe inherited a social market order built under conditions of growth, demographic advantage, cheap energy, and geopolitical shelter. It now faces ageing, technological rivalry, ecological limits, war on its borders, fiscal constraint, and political fragmentation.

The test is therefore not whether Europe can preserve everything it once had. It cannot. The test is whether Europe can preserve the moral core of its project by changing its institutional form. That moral core is the idea that economic life should serve human dignity, that freedom requires social security, that democracy must discipline markets, and that prosperity must be compatible with justice and ecological responsibility. If Europe can translate that idea into productive investment, clean industry, social inclusion, and democratic legitimacy, the European dream will not remain a museum-piece of post-war history. It will become a plausible blueprint for a world searching for prosperity without social abandonment and modernisation without political disintegration.

Bibliography

Draghi, Mario. 2024. The Future of European Competitiveness. European Commission.

Esping-Andersen, Gøsta. 1990. The Three Worlds of Welfare Capitalism. Princeton: Princeton University Press. ISBN-13: ‎ 978-0691028576

Ferrera, Maurizio. 2017. “The European Social Union: A Missing but Necessary Political Good.” In A European Social Union after the Crisis, edited by Frank Vandenbroucke, Catherine Barnard, and Geert De Baere. Cambridge: Cambridge University Press.

Ferrera, Maurizio, Francesco Corti, and Maarten Keune. 2023. “Social Citizenship as a Marble Cake: The Changing Pattern of Right Production and the Role of the EU.” Journal of European Social Policy 33(5).

Habermas, Jürgen. (2011). Zur Verfassung Europas: Ein Essay. Suhrkamp Verlag.

Habermas, Jürgen. (2012). Die Krise der Europäischen Union im Lichte einer Konstitutionalisierung des Völkerrechts–Ein Essay zur Verfassung Europas. Zeitschrift für ausländisches öffentliches Recht und Völkerrecht, 72(1), 1-44.

Hall, Peter A., and David Soskice, eds. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press.

Hemerijck, Anton. 2013. Changing Welfare States. Oxford: Oxford University Press.

Letta, Enrico. 2024. Much More Than a Market: Speed, Security, Solidarity. Report to the European Council.

Mazzucato, Mariana. 2013. The Entrepreneurial State: Debunking Public vs. Private Sector Myths. London: Anthem Press.

Mazzucato, Mariana. 2021. Mission Economy: A Moonshot Guide to Changing Capitalism. London: Allen Lane.

Polanyi, Karl. 1944. The Great Transformation. New York: Farrar & Rinehart.

Rawls, John. 1971. A Theory of Justice. Cambridge, MA: Harvard University Press.

Scharpf, Fritz W. 1999. Governing in Europe: Effective and Democratic? Oxford: Oxford University Press.

Scharpf, Fritz W. 2009. “Legitimacy in the Multilevel European Polity.” European Political Science Review 1(2): 173–204.

Vandenbroucke, Frank, Catherine Barnard, and Geert De Baere, eds. 2017. A European Social Union after the Crisis. Cambridge: Cambridge University Press.