The European Union is one of the most progressive and pervasive political and ec onomic institutions in the world

today.Since its inception, the EU has taken hug e strides toward further integration and enlargement in the hope that it will pr ovide peace, security and equality for its citizens and promote economic and soc ial cohesion. Enumerating the advantages and opportunities resulting for economy , societies and individuals in the EU, one always has to take into consideration the serious challenges the formation of the Union poses to the particular membe r states and to their inhabitants.This paper attempts to examine some of the key contemporary challenges confronting the European Union, and to explain how they are challenging for the EU while paying a close attention to the possible solut ions to the problems. Enlargement is one of the most powerful means of the European Union's policy. Th e enlargement policy serves the strategic interests of the EU in terms of stabil ity and peace, security and conflict prevention, and as the basic postulate of c reating the EU in general. The aim of the EU is certainly a compact unit with st able, prosperous and democratic neighbors. This policy of enlargement contribute d to more prosperity and growth opportunities, also to increasing connectivity o f the transport and energy routes, as well as the reputation of the EU in the wo rld.On the basis of common values and common interests, the EU and its neighbors can be more efficient in coping with current challenges. Accordingly, the consi stent application of the Lisbon Treaty, which applies to the future enlargement policy, is more important than ever before. This consensus is based on the princ iples of strengthening commitments, fair and strict conditionality and establish ing better communication with the public, combined with the ability of the EU to integrate new members. Future European citizenship, as well as transnational democracy, has to be based on inclusion and provide perspectives to the hopeless, marginalized, criminaliz ed and ignored strata of citizens. Their existential demands and interests shoul d be the main impulse for a new debate. The stronger and better-organized player s and stakeholders, such as governments, business, trade unions, chambers, etc., should carefully listen to the voices of the excluded. This might not be possible without severe disagreement, conflict and controver sy But a new European Social Contract cannot be imagined today based upon harmoni ous agreements, mutually shared world views and the expectations of 500 million citizens and their representatives. Only a combined bottom-up and top-down appro ach might help to provide the proper conditions for such a widescale debate whic h would pave the way to the re-formulation of the European public good. This cou ld be the common denominator upon which a transnational social contract might be based.Europe has a fundamentally different meaning, message and potential today which needs to be digested and further articulated by itself. If it really wants to turn its mission into a positive and inclusive social project of open-ended regional integration, it has to say farewell to its old image, way of thinking, speaking and acting. The New Europe will be as it partly is already a cultural, religious and ethnic mix and one should understand this as a strength rather than a weakness. It wil l include a critical mass of Muslims and citizens of other religions and non-Eur opean cultural habits. The process of reconsidering and reinventing democracy in an age of uncertainti es will not be smooth. But when else can it be done? The alternative is a protra cted (and in unforseen moments accelerated) decay and disintegration of existing institutions which will conclude in the self-destruction of the achievements of European construction an unstoppable negative spiral, What needs to be done follows directly from this analysis of what has happe ned. Recognizing the mistakes and identifying the misconceptions that have creat ed the current situation is the first step; correcting them is the second. Only Germany can initiate the process because, as the country with the highest credit standing, it is in the driver s seat. If a debtor country tried to do it would me rely aggravate its own position. Admitting and correcting mistakes is never easy

. In this case there is no shame attached to it because the situation was so com plicated that it boggled every mind. Doing it would earn Germany the long lastin g gratitude of the rest of Europe. Failure to do is much worse The European Union is neither a pure intergovernmental organization, nor a tr ue federal state. As National interests matter and states are becoming all the m ore reluctant to delegate more powers and sovereignty to the European Union. Ide ntity politics play a fundamental role in the EuropeanUnion s quest to transform i ts future shape. The goals of Europe 2020 strategy need to be achieved through c ommitment, cooperation and action both at national and EU levels. The European U nion is unlikely to be able to meet the challenges in Europe without greater sta te capacity or more democratic legitimacy. Regarding the current situation and r elations within the European Union, it is more realistic to view EU as a means t o overcome the period of crisis, i.e. to pass through a period of consolidation and reform of institutional arrangements. This period may be crucial for the fut ure of the European Unionin a way that improves the economic and political dimen sions of integration.A lot of attention and energy is aimed at the institutional ization of the mechanism of crisis management in the Eurozone. This is a good an d important goal.