To many people, modern Europe still appears to be what it was in the 19th century. This version of Europe has endured two world wars, yet its palaces and old city streets remain intact. 19th-century-style cafes, bookstores, literature, poetry, and artwork continue to adorn the continent, giving the impression that ancient grandeur still exists. It feels as though Europe retains the right to stand proudly among the nations of the world. Perhaps it is this aura of old European nobility that allows European leaders to often be seen passionately offering advice to the world and passing judgment on global affairs.
Yet the reality is that the Europeans, living in a fog of nostalgia, have not fully realized that Europe has quietly undergone a profound transformation. In fact, Europe is rapidly distancing itself from the "Second World" and is heading toward the "Third World". In other words, Europe today is slightly better off than the Third World, but it has become dependent on its past glory among Second World countries, and its actual position in the global development tide is now nearly equivalent to nations like Malaysia, Brazil, Mexico, Turkey, and India.
How did Europe fall from grace?
The decline of Europe can be attributed to four major factors.
The first is the European debt crisis. In 2009, the then-new Greek government announced that the fiscal deficit as a percentage of GDP was actually 12.7%, indicating that the deficit data by the previous government had been underreported. Shortly after, Greece's sovereign credit rating was downgraded by the three major credit rating agencies (Standard & Poor’s, Moody’s, and Fitch). It could no longer raise funds in the market and faced the risk of default. Then, the crisis began to spread. Between 2010 and 2012, it affected Greece, Ireland, Portugal, Cyprus, Spain, Italy, and other countries, and overall, the EU's finances were on the brink of total collapse.
Under such circumstances, the EU established the so-called European Financial Stability Facility (EFSF) to try to salvage the situation. However, Article 125 of the EU’s Lisbon Treaty clearly stated the "no bailouts" clause, which, along with later EU stability and growth pacts, emphasized that member countries’ deficits should not exceed 3% of GDP, and debt should not exceed 60% of GDP. These rules were meant to enforce fiscal discipline and accountability. In practice, however, the EU provided loans to various member countries through the EFSF and the European Stability Mechanism (ESM) to resolve the fiscal crisis. What Europe did was a form of "indirect rescue", a kind of workaround. The loans were made through institutions, so it was not technically a bailout, even though the funds still came from the EU. Through this approach, Europe managed to survive the crisis.
The aftereffects of this approach are also quite evident. The EU began to take on a supranational status, even showing a certain degree of centralization of power. This eventually manifested in bureaucratization and a shift towards left-wing policies. As for the economy, although the EU implemented unconventional fiscal assistance, it is still not definite that Europe has fully recovered from the debt crisis and returned to growth.
The second factor is immigration. Around 2010, a natural crisis in the Mediterranean began to unfold. At that time, ANBOUND had already warned that the Mediterranean region was facing resource depletion, which would lead to social unrest. Shortly after, the Arab Spring erupted, and a wave of immigration that would affect the entire world began to surge. According to rough statistics from various European countries, the number of refugees is estimated to be between 5 million and 15 million. A more objective estimate puts the number of Arab immigrants in Europe at around 20 million. This estimate is based on the fact that there are a large number of illegal immigrants whose numbers are excluded from official statistics. Additionally, the birth rate among immigrant populations remains high; therefore, after arriving in Europe, the number will continue to expand.
What does the 20 million immigrant population mean?
There are 27 member states in the European Union, and of these, 15 countries have a total population of fewer than 10 million people, while 12 countries have populations greater than 10 million. This means that Europe, and most of the EU, consists of smaller countries, each with a population below 10 million. Such data indicates that the number of immigrants is like an additional large population country. This new population enjoys all the social welfare benefits according to EU standards, utilizes the security guarantees provided by EU countries, and consumes housing, cars, and other public transportation. Under the European welfare system, their status is the same as that of citizens.
Can the European Union afford the consumption of such a large population? Clearly not. They must cut other social welfare programs, including national security spending. When I spoke at ANBOUND’s 2025 annual conference, I noted that EU countries can only choose one between welfare spending and defense spending, and that is exactly what I meant. In fact, the EU has already been hollowed out. The current euro exchange rate is like a tree without roots, facing the risk of collapse at any moment.
Third is the climate agenda. The EU’s climate agenda, here mainly referring to its climate change policies and targets, is currently one of the most ambitious and systematic climate action frameworks in the world. Its core is the European Green Deal, which aims to achieve climate neutrality, i.e., zero greenhouse gas emissions, by 2050. These radical “green bans” include, starting in 2035, all newly sold passenger cars and light commercial vehicles must be zero-emission, effectively banning the sale of fuel-powered vehicles; aviation and maritime transport are subject to similar restrictions. The share of renewable energy is required to reach 42.5% by 2030, with an aspirational target of 45%. Beginning in 2034, the EU will comprehensively ban imports of high-carbon products, reduce the use of fertilizers and methane emissions, and restore wetlands and forests. Nuclear power plants are prohibited, and before leaving office, Germany’s left-wing Scholz administration, in order to push forward the “energy transition”, even rushed to use its remaining time to demolish the last coal-fired power plant that had originally required an investment of EUR 3 billion.
Yet, in its green political agenda, the EU did not conduct rigorous and scientific cost assessments. Instead, driven by political needs, it carried out what is packaged as a “growth strategy”. In pursuing this green political agenda, the EU failed to undertake thorough and scientific cost evaluations. Everything has, in effect, been subordinated to political necessity. As a result, the total social cost has not been fully estimated. In reality, all considerations have been made to serve political objectives.
On the surface, the EU’s cost estimation appears to be based on extensive studies conducted by the European Commission, the European Parliament, independent think tanks such as Cambridge Econometrics, and consulting firms like PwC, utilizing macroeconomic models that include E3ME, JRC-GEM-E3, and PRIMES for simulation analysis. In reality, the assumptions and parameter settings underlying these studies are riddled with flaws and are more often than not mere assumptions. For example, the direct costs of the transition are simply replaced by “investment needs”, implying that these costs are merely investment requirements. This does not consider if there are the monetary resources for it, and who will provide the funds. As for the benefits, such as preventing climate damage, they are not only exaggerated but are also built entirely on scenario-based analysis. Hence, the benefits are hypothetical. Beginning with gradual implementation in 2023 and reaching full enforcement in 2026, the increased costs imposed on firms through measures targeting high-carbon imports, such as steel and chemicals, according to economic assessments, are intended to prevent “carbon leakage”. Through models and scenarios saturated with assumptions, conjectures, and hypotheses, and the rationalization of all these, the costs are calculated as if they were settled. Even the inflationary effects and the burden on households are glossed over and labeled “green inflation”, while the real economic consequences are of no concern to anyone at all.
In reality, the EU’s climate agenda has brought about enormous costs, severely damaging European companies and industries, leaving them with no choice but to relocate away from Europe. According to a 2021 PwC survey of 300 European companies, 60% were not familiar with the European Green Deal (EGD) at all; 49% claimed they were “prepared”; 66% said they had already allocated capital to sustainability (with priorities including clean energy at 78% and emissions reduction at 59%); and fully one third of companies were completely unaware that the EU even offers incentive measures, let alone having made use of them. Disappointment within Europe’s business community regarding the climate agenda is plainly evident.
The EU green agenda led by Ursula von der Leyen has gravely overlooked the severe impact that costs impose on European society, and that the entire cost calculation relies on a top-down, god’s-eye perspective. What appears on the façade to be cost assessments wrapped in numerous tables, data points, and curves is, in reality, meaningless. The consequence has been today’s stagnation of the European economy and industry, which the EU has then deflected and attributed to the so-called “aftereffects” of the debt crisis.
Fourth, there is the bureaucratization and leftward drift of the European Union. Elon Musk bluntly stated that the EU is a “bureaucratic monster” and that it smothers innovation. Well-known European companies such as Siemens have repeatedly criticized EU-style bureaucracy as well. Many entrepreneurs complain that bureaucracy within EU institutions has reached an extreme level, with approvals sometimes requiring an excessive amount of paper documents.
A leftward tilt is also a major characteristic of the EU, and it is reflected primarily in its political agenda rather than in seat distribution. Judging from the distribution of seats within EU institutions, the left cannot be said to hold a clear advantage. However, when viewed through the lens of policy priorities, the EU’s main political agendas, such as social welfare, climate action, migrant inclusion, universal healthcare, paid leave, trade union protections, as well as higher taxation and stricter gun control, clearly bear strong left-wing characteristics. In addition, Europe’s long-standing tradition of the social-market economy that combines capitalism with social protection enjoys a certain level of societal consensus. As a result, even right-wing parties often align with the left, supporting policies and political appeals that are substantively left-wing. The most conspicuous example is the collective action in the German parliament, where parties joined forces to block and marginalize the Alternative for Germany (AfD), despite it holding the second-largest share of seats.
Looking at its political agenda, the EU remains a supranational institution committed to a left-leaning political program. This in itself determines that the EU is by no means business-friendly, and the overall socioeconomic decline of European society is, in fact, an entirely predictable outcome.
The combined effects of these four major factors constitute Europe’s failure. More troubling still is that for European countries, none of these four factors is easy to resolve. Their combined impact is dragging Europe ever deeper into a spiral marked by intensifying social conflicts, escalating clashes between the left and the right, economic stagnation, industrial relocation, an inability to confront challenges from emerging powers such as Russia and Turkey, and a continued erosion of its global influence.
Final analysis conclusion:
Europe has already undergone profound changes quietly. It is rapidly slipping out of the Second World and racing toward the Third World. This decline is mainly rooted in four factors, i.e., the eurozone debt crisis, immigration, the climate agenda, and bureaucratization coupled with leftward drift. For European countries, none of these is easy to resolve. Their combined effect is dragging Europe ever deeper into a downward spiral marked by intensifying social conflicts, escalating clashes between the left and the right, economic stagnation, industrial relocation, an inability to withstand the impact of emerging powers, and a continued erosion of its global influence.
