In the EU the situation is clear and much talked-about. The crisis has laid bare the fact that a single currency will be an unsustainable experiment if it is not accompanied by large-scale political integration. In order to catch up with the highly developed integration on the economic side, political integration in form of fiscal union, the common management of budgets and debt, and, potentially later on, of taxes, and welfare and social policies—e.g. retirement age, health care, unemployment benefits—will have to follow.

But nations are reluctant to give up such large parts of what constitutes their statehood, and, in the end, their democratic systems. Budget powers constitute the crown right of any parliament, and taxation and social legislation reflect the value systems and identities of nations to no small extent. Should the member states of the EU indeed agree to such drastic sovereignty bargains, new sources of political legitimacy beyond the nation state would have to be invented. A European demos would have to form. Nations would in effect have to legislate themselves out of relevance. No-one in Europe is ready to do such a thing, even though the logic of governance in a globalized world makes it basically unavoidable.

In NATO, the situation is exactly the same. Here the crisis is playing out in a smaller, narrower policy field. However, it is the one field that is even more important, both practically and psychologically, for the raison d'etre of the nation state: the nation's monopoly over the instruments for the external use of force and for its own defense.

In order to come to grips with the unfolding crisis and the scarcity of means it brings, the alliance has adopted the policy of "Smart Defense", a slightly more advanced version of the old idea of pooling and sharing military assets based on an agreed division of labor between a group of NATO allies. At first sight, this seems to be yet another reprise of a worn-out idea. What's different this time is that NATO members increasingly not only talk about it but actually mean it. Granted, the alliance is far away from a substantial, effective, and reliable communalization of military capabilities. But member states have gotten serious enough about it to discuss, for the first time, the question of "availability", formerly a taboo.

Availability touches upon the politically most problematic aspect of smart defense: will members states be ready to always deploy their share of a communalized pool of military assets if the other allies demand it? Will they deploy it without hesitation and without national caveats? Can everyone participating in the pool rely on everyone else and thus fully trust the system? During the NATO summit in Chicago earlier this month, allies discussed, for the first time, the question of how constitutional and parliamentary procedures must be streamlined among allies to create a reliable and trustworthy pooling and sharing scheme.

Availability is just a small example of what smart defense will really mean if it ever became a reality (a big if, admittedly): the streamlining among allies of their national defense budget planning, their defense planning, their armaments procurements, their operations planning, and their training and exercise policies. Furthermore, smart defense would also mean real intelligence sharing among those participating. And it would mean the full harmonization of the diverse political and legal procedures needed to authorize the deployment of force in each single nation. In other words: it would mean, in practice, the end of full national authority over the country's armed forces. As in the EU, no-one in Europe is ready to go this far yet. For most nations this idea is pure science fiction. Yet, it is in the political logic of smart defense, and it is in the logic of the economic and financial crisis which creates the sheer necessity for European nations to work together—or stop mattering in the world.

The nation state was invented in Europe. It has unleashed enormous powers, both for good and for bad. Partially transcending the nation state for its own governance—by means of the EU and NATO—has made and kept the continent rich, safe, and free during the last 60 years. Now Europe, facing not only a short-term crisis but also the prospect of long-term decline in a globalized world, needs to update its own invention. It needs to create a nation state that is strong and meaningful enough to still infuse people with a sense of purpose and identity, while at the same time organizing many of the state's defining and pre-eminent functions in a new kind of legitimate political entity that transcends the nation. The process of getting there will be enormously painful and riddled with setbacks. But it is the only way that Europe can continue to afford its nations.