A year ago, when the world’s elite last met in Davos, Europe itself appeared to have survived a series of threats to its cohesion.

The launch of the European Central Bank’s quantitative-easing program looked set to underpin a modest recovery. Banks had bulked up on capital. A newly installed European Commission promised steps to deepen the single market, boost investment and reduce red tape.

Today, the survival of the European project looks increasingly precarious.

Two crises—Greece’s brinkmanship that almost culminated in the country’s ejection from the eurozone and the turmoil surrounding the surge of migrants—have exposed deep flaws in the governance of some member states, not least that of Greece.

The EU’s crisis-fighting efforts have been overly lopsided. Success in devising new mechanisms to share responsibility within the EU, whether through bailout mechanisms or refugee resettlement programs, hasn’t been matched by similar progress in reducing the risks of shocks within countries themselves.

This is particularly true in the economic sphere, where debate over risk reduction has long been trapped in a sterile debate between a simplistic Keynesian faith in monetary and fiscal stimulus, and an equally simplistic German-led attachment to fiscal austerity. Largely missing from political debate has been acknowledgment of the need for what the Austria-born economist Joseph Schumpeter called creative destruction, the efficient reallocation of resources as a condition for long-term sustainable growth.

European political debate has yet to internalize the reality of what membership of the EU—and particularly the eurozone—actually involves. Governments and voters have still not reconciled themselves to a world where capital and talent are free to move anywhere in Europe.

Instead, many governments responded to the inevitable pressures caused by the creation of a dynamic EU single market in the years before the global financial crisis by introducing new protections and special privileges for influential corporate and social lobbies. The result was that many economies became increasingly inflexible just when they needed to become more flexible.

In a system where capital and talent are free to move out, the job of governments is to create conditions for capital and talent to flow in. That requires a skilled and adaptable labor force, effective public administration, efficient legal systems, fair insolvency procedures, incentives for entrepreneurs to start companies and for small companies to become bigger companies.

Viewed through this prism, few European governments emerge with much credit.

Germany lectures the eurozone on the need for fiscal discipline but has done little in the past seven years to boost its own potential growth rate, widely estimated at little more than 1%. French President François Hollande had to threaten to dissolve parliament to pass a law allowing stores to trade for 12 Sundays a year. Finland faces a fourth year of recession, held back by some of the highest welfare costs and most restrictive labor laws in Europe. Spain and Portugal’s center-right governments embraced austerity as a badge of pride and pushed through some useful reforms but left intact a highly regulated business environment designed to shield many companies from competition.

The risk now is that the political conditions for deep reforms are deteriorating. The stimulus-induced cyclical recovery has eased the pressure on governments to cut spending and overhaul public administrations. At the same time, frustrated voters are turning against mainstream parties in favor of insurgent parties who oppose reform under the banner of anti-austerity. Meanwhile, the combination of weak growth, dire debt dynamics and political instability, continues to hold back corporate investment with worrying implications for future productivity growth.

That raises the question of what will happen once the current stimulus-driven upturn has run its course. The EU’s urgent task in 2016 is to find ways to encourage vulnerable countries to raise potential growth, productivity and private sector investment to levels that will remove doubts over long-term debt sustainability if and when the ECB stops buying government bonds. If this proves too hard, the world will have to brace itself for further European shocks.