Since its beginning, the design of a European Union (EU) has been inspired by federalist ideas. Eighty years later, though, its governance structure is still not clear. The EU has federalist characteristics, but it is neither a federation nor a confederation. It is perhaps best described with the words of Michael Burgess as a unique experiment. That experiment reached a critical phase with the Russian invasion of Ukraine. The chapter discusses the following theses. First, the Russian invasion of Ukraine has shown the need for a common defence force based on a common foreign policy. To realize these, the EU must adopt a governance model that is necessary for a coherent response to Putin’s aggression. A common foreign and defence policy is also needed for withstanding future external threats. Failing to create such an adequate governance model would be missed opportunity that puts the EU’s very survival at risk. Second, if the EU does give birth to an active and operational common foreign and defence policy, a European army will be instrumental. Third, the only effective framework for realizing this is a federation of sovereign states. The chapter discusses a detailed blueprint for a federal Europe that was proposed by F.A. Hayek in 1939. We can still learn from it. Not only does it contain a detailed description of the main features of the EU today, but of its future agenda, too. Moreover, Hayek wrote his article in circumstances that are very similar to those of today, and its purpose was to try and preserve peace. In later publications, he developed his ideas on federalism in ways that may help to improve the EU’s democracy. The general framework of the chapter is the balance of power in the world. After World War II, the global balance of power changed dramatically. The Soviet Union (SU) no longer exists, and the hegemony of the United States of America (USA) is both eroded from within and actively contested by China. This is closely related to the shift from political to economic factors as the basis of geopolitical power. The successor of the SU, the Russian Federation, still considers itself to be a world power, even though it lacks the necessary economic foundation. The EU, on the contrary, has an economic weight in the world that is at a par with that of the USA and China but is not a political world power. This double asymmetry is complicated by the fact that the SU possesses the biggest nuclear weapons arsenal in the world while the EU as such does not have nuclear arms; only one of its members, France, does. The incongruence between the EU’s political stature and its economic weight is a consequence of the fact that it lacks a clear form of governance. The main thesis of this chapter is that the EU can only bring its political clout in the world in balance with its economic weight by becoming a federation. Given the reluctance of the USA to keep playing a dominant role in NATO, the way to this is the creation of a European army. This initiative dates back to the early 1950’s but the birth of NATO stopped its development in its tracks. Subsequently, it was even forgotten. For its revival, a redefinition of the relationship between a European defence force and NATO is one of the major problems that has to be solved.Finally, the chapter compares two different approaches to the creation of a united Europe. One is the gradual, piecemeal, technocratic and economic-deterministic approach that is associated with Jean Monnet. The other is that advocated by Altiero Spinelli and Friedrich von Hayek, who, from completely different political backgrounds, uphold the primacy of general principles. It is argued that the Hayekian idea of federalism, in which economic factors are necessary but not sufficient conditions, and in which democratic procedures play a central role, contains the elements to overcome the democratic deficit that has plagued the EU from its very foundation.