In a speech to the European Parliament, the head of the bloc's executive, President Jose Manuel Barroso, said he was not calling for a European “superstate”, but said the EU would always be less than the sum of its parts unless the union was deepened.
“Let's not be afraid of the words: We will need to move towards a federation of nation states. This is our political horizon. This is what must guide our work in the years to come,” he said in his annual “state of the union” address.
“A democratic federation of nation states that can tackle our common problems, through the sharing of sovereignty in a way that each country and its citizens are better equipped to control their own destiny.”
While there may be enthusiasm in some European capitals for such a move, it is a vision that is likely to rankle in countries such as Britain, where there is strong opposition to the idea of more powers being devolved to Brussels.
With concerns already deep about a two-speed Europe between those countries with better growth prospects and those that are growing barely at all, and tensions between the 17 countries in the eurozone and the 10 others that do not use the single currency, a drive towards a federal Europe could lead to more complex divisions across the continent.
In the mid 2000s, an effort to draw up a constitution for the EU was ultimately defeated after voters in several traditionally pro-European states rejected it in referendums.
Barroso said that in an age of globalisation, the EU would struggle to compete unless it was prepared to pool its sovereignty and act as one.
“I said a federation of nation states because in these turbulent times, we should not leave the defence of the nation just to the nationalists and populists,” he said. “I believe in a Europe where people are proud of their nations but also proud to be European.”
Some members of the European Parliament, including committed pro-Europeans such as former Belgian prime minister Guy Verhofstadt, immediately spoke out against Barroso's call, saying the EU needed to deepen the structure already in place, not become a federation of nation states.
Barroso said his vision would require another overhaul of the EU's treaty - the fundamental set of laws that govern how the European Union is managed. Changing the EU treaty has happened in the past, but it is a complex and lengthy process that often raises tensions among member states.
Barroso, a former Portuguese prime minister who has led the European Commission since 2004, said his office would flesh out proposals for the future shape of the EU, including the legal changes required to become a federation, before mid-2014.
In the meantime, he called for “broad debate” across Europe and its citizens about how the continent planned to recast itself and what attributes it would need to compete with its major trading partners such as China and the United States deep into the 21st century.
"Many will say that this is too ambitious, that it is not realistic," he said. "But let me ask you this - is it realistic to go on like we have been doing? Is it realistic to see more than 50pc of young people without jobs in some of our member states?
"The realistic way forward is the way that makes us stronger and more united. Realism is to put our ambition at the level of our challenges."