In recent months we have seen growing optimism and confidence about Europe's future.

After a state of almost constant turmoil since the global financial crisis, more positive economic data and the latest elections in France and the Netherlands have helped boost the feel-good factor across the European Union. These and more are reflected in Wednesday's state of the union address by Jean-Claude Juncker, the EU commission president.

But there is still a prevailing sense of dissatisfaction and call for change among large parts of the population which should not be ignored.

Today, Europe has the opportunity to address its challenges, by showing strong leadership and bold vision for future generations. It needs to build on this positive momentum, while also recognizing the urgency and critical timing for a new chapter in Europe’s history.

As Europe develops its reform agenda, we should consider the key five challenges Europe needs to address:

1. Moving towards a human-centred economy

According to the World Economic Forum’s own Global Competitiveness Report, eight of the ten most competitive economies in Europe are member states from north-west Europe – with Switzerland and Norway completing the ranking. Businesses are optimistic about the outlook for the EU and expect GDP growth of 2% annually over the next five years.

But the double-dip recession in Europe in 2007-8 and 2012-13 exposed deep economic weaknesses and asymmetries among European countries and inequality increased both within and among them.

Income declines were particularly stark for the young and low-skilled in Europe, and European firms have fallen behind on digital adoption and digital infrastructure relative to global competitors.

Europe should build on its global leadership role in the protection of citizens’ well-being, ethical and legal protections for consumers and workers, and ensuring high quality of life. It should also capitalize on digital opportunities in the age of the 4th Industrial revolution.

Europe can boost economic growth through digitization and automation, while also ensuring the benefits are shared equitably across society.

2. Management of migration and borders

Migration has been an integral part of the European success story, but the latest wave of refugee inflow has shown the limitations of the European open border approach and is resulting in heightened security concerns, societal strains, and a rising populist backlash.

Continued uncontrolled migration of low-skilled workers who do not integrate into the workforce could strain public welfare systems. Nationalism and anti-immigrant sentiment could also rise. But improving the people flows into Europe and their successful integration into society, are critical for the political cohesion and economic prosperity of Europe.

Europe’s next generation aspires to convert migration into the foundation of a strong society where migrants and their integration are regarded as drivers of economic prosperity and a flourishing and dynamic cultural lifestyle.

3. Leading global sustainability

European governments, businesses, and citizens have recognised that that economic growth and sustainable energy policy can go hand-in-hand.

A transition to a low-carbon economy can drive European investment and growth, support industry, and encourage energy security, all while helping to address global climate change. Unaddressed climate change would increase global instability with a direct impact on some parts of Europe, while increasing geopolitical uncertainty that may limit European access to energy and resources.

European citizens, especially young people, want a stronger action agenda to address climate change.

4. Dealing with threats to citizen safety

Over the past 60 years, European collaboration and integration has reduced conflicts between member states and contributed to peace and prosperity in the region. Pressure to cut defence budgets due to austerity has recently eased, but few countries meet NATO's 2% defence-spending target.

Cybersecurity is under-resourced, driven by a passive acceptance of the risks, rather than recognized as a fundamental security threat. Europe is facing rising geopolitical tensions as the world order becomes increasingly multipolar. “Hybrid threats” emerge as cyberattacks are increasingly used against economies, businesses and citizens; while terrorism and radicalization continue to increase.

And while many Europeans reject the idea of stronger integration across Europe, a majority of Europeans support the EU taking on a greater global role and are in favour of increasing defence spending.

With increasing collaboration or integration in defence and security among countries, Europe is well positioned to take on a greater global role in security and defence and there is a currently a strong effort underway to strengthen Europe wide collaboration on defence and security and ideas such as the establishment of a “European DARPA” can help in that direction.

5. How to be relevant, trusted and responsive

Europe and the countries within it are widely recognised as world-leading in liberal democracy today, while worldwide, in 2015, 72 countries experienced a decline in democratic values in 2015.

The changing nature of communication, public discourse, and news is putting new pressures on democracy, and Europe is experiencing a rise of populism and authoritarianism, and a decline in citizen’s trust in EU institutions and European governments.

However, Europe can benefit from the Fourth Industrial Revolution if we ensure the technological advancements are used to help public sector institutions more effectively deliver services and identify citizen needs.

All of these challenges will take time to be resolved and it will require collaborative but decisive action to advance a strong reform agenda across Europe. We need to recognize the different needs of countries while also ensuring mutual benefits and progress for all members of this union.

We at the World Economic Forum have launched a new initiative, A new concept for Europe, to address the above challenges for Europe and reshape Europe’s future.

This initiative brings together youth from across the continent with leaders from the public, private and social sector to discuss their ambitions for Europe and develop new ideas which can support the current reform efforts. This new concept and the best new ideas will be presented at the Annual Meeting 2018 in Davos.