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The writer is a member of the executive board of the European Central Bank

Europe is often portrayed as a continent in decline, squeezed between geopolitical rivals, held back by excessive regulation and struggling to keep pace with rapid technological change. But although this narrative is appealing in its simplicity, it is misleading.

By many measures, Europe is among the regions with the highest quality of life. Strong social protection, accessible healthcare and affordable education enable people to live secure, fulfilling and prosperous lives.

Europe is also one of the few regions in the world where democracy, the rule of law and media freedom remain firmly entrenched, even if these values are also facing pressures here. In a world increasingly drifting towards autocracy, this institutional integrity is a significant asset. It provides stability, predictability and trust.

Throughout its history, Europe has made deliberate choices about the kind of society it wants to be — choices that shape how much Europeans work, how income is distributed and how risks are shared. These choices improve life outcomes, but they also affect conventional measures of economic strength. For example, if Europeans were to work as many hours as Americans, around two-thirds of the transatlantic gap in real GDP per capita would disappear, according to ECB staff calculations.

Europe is also more inclusive, with economic gains distributed more broadly. In the US, a large share of income does not accrue to 90 per cent of the population. This difference also reflects a growing concentration of income gains in specific sectors and regions. Growth in real GDP per capita in the median US state and in the median Eurozone country has evolved largely in lockstep.

In fact, countries in the southern periphery, once synonymous with crises and high unemployment, have experienced dynamic growth and strong employment gains in recent years driven by structural reforms, common European funds and strategic industrial policies.

Spain, for example, has emerged as a European leader in renewables, positioning itself as a hub for the energy-intensive industries of the future. Ireland, meanwhile, has become a global hotspot for technology, pharmaceutical and life science companies.

Put simply, the narrative that Europe is stagnating does not withstand scrutiny in large parts of the currency union. Today, economic challenges are felt most acutely in the Eurozone’s traditional core.

Germany, in particular, is facing significant headwinds. Its population is ageing and its export-dependent model no longer fits a world where globalisation is fraying. Years of weak domestic demand have left Europe’s largest economy overly exposed to external shocks.

These shortfalls are now being addressed with the right policy instruments. Targeted public investment in infrastructure and defence, supported by structural reforms, can help lift the German economy out of stagnation, with positive spillovers to the rest of the continent.

Where Europe does fall short, however, is productivity growth. This is not because it fails to innovate, but because it struggles to translate ideas into commercial success. European business founders still need to navigate a complex patchwork of legal systems, corporate codes and regulatory regimes. This fragmentation acts like an internal tariff wall, making it costly and difficult to expand across borders. As a result, intra-EU trade in services is no higher than trade with non-EU countries.

The most powerful idea for breaking this impasse is the creation of a 28th regime: a unified European corporate framework open to companies of all sizes and sectors. A 28th regime would not be intended to replace national legal frameworks, nor would it harmonise taxes or social security systems. Instead, it would provide what Europe has long been missing: a truly single market that allows Europe to compete as one economy rather than 27.

Companies would grow across borders without legal reinvention. Capital markets would deepen. Talent would circulate more freely. And Europe could build a genuine “Made in Europe” brand for global market leaders that remain European not just in origin but also in value creation.

This is best achieved by means of an EU regulation that is directly applicable across all member states. Otherwise, Europe risks ending up with 27 versions of the 28th regime, recreating the very fragmentation it seeks to eliminate.

Europe has ideas. It has talent. What it needs is scale — and the courage to build it.