This McKinsey Global Institute article assesses Europe's competitiveness in a new geo-economic era. While Europe excels in sustainability and inclusion, its economic growth lags behind the United States, creating a significant prosperity gap. The authors identify seven key areas impacting competitiveness—innovation, energy, capital, supply chains, talent, size, and competition—and propose ambitious, albeit challenging, goals to address these weaknesses. These goals necessitate higher investment, strategic policy changes, and collaboration between businesses and policymakers. The ultimate aim is to boost Europe's economic performance while maintaining its commitment to sustainability and inclusion.