Europe has undergone a painful policy re-evaluation of its long-standing approach to China. The premises of its China policy – engagement of a developing economy and a helping hand to a wider societal transition – were out of date. During the public diplomacy skirmishes of 2008-2009, a new realist mood set in at the level of the European Union. The larger member states had experienced the futility of a go-it-alone policy towards China, which only served the ability of China to divide-and-rule. But as this shift to realism was taking place, a new development intervened: with the global financial crisis of 2008, and the resulting stress on public debt in many European member states, China became, for the first time, a provider of commercial and financial opportunity to Europe. This is potentially creating some of the fabled synergy that has existed in the Sino-U.S. relationship. But Europe, unlike the United States, does not have a federal system. How Europe can achieve the level playing field it is seeking in its relationship with China is quickly moving beyond a European foreign policy issue – it is beginning to call into question the very construction of the European Union itself.