European Commission head Jean-Claude Juncker delivers a blunt assessment of the EU's challenges.

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European Commission head says "galloping populism" is a threat to EU

He called for a single, permanent headquarters for an EU military force

CNN  — 

The European Union is facing “an existential crisis” as it confronts the twin challenges of rising nationalism and Islamist terrorism, the head of the European Commission warned Wednesday.

And the bloc should establish an EU military headquarters, and work toward creating a common military force, European Commission President Jean-Claude Juncker said in Strasbourg Wednesday.

Delivering his annual State of the Union address before Members of the European Parliament, Juncker said that the bloc faced a critical 12 months ahead “if we want to reunite our union.”

“I am not going to stand here today and tell you that everything is now fine. It is not,” he said, launching into a blunt assessment of the challenges facing the bloc.

“I have witnessed several decades of EU integration,” he said.

“But never before have I seen such little common ground between our member states. So few areas where they agree to work together… Never before have I seen national governments so weakened by the forces of populism and paralyzed by the risk of defeat in the next elections.

“Our European Union is, at least in part, in an existential crisis.”

EU will survive Brexit

The 28-member bloc – soon to become 27 – suffered one of the most serious blows in its history when Britain voted to leave in a June referendum.

Juncker said he respected but regretted the decision, and urged the British government to formally notify the EU of its intent to leave to hasten the complicated Brexit negotiations.

Brexit: EU tells Britain it can’t pick and choose

The EU would survive the departure of Britain, he said, but he warned that the vote was an indication of the threat posed by “galloping populism” in an increasingly nationalistic Europe.

“The great, democratic nations of Europe must not bend to the winds of populism,” he said, referencing the killing of a Polish man in an allegedly racially-motivated hate crime in an English town last month.

“We Europeans can never accept – never – Polish workers being harassed and beaten up or even murdered in the streets of Essex.”

Europe ‘needs to toughen up’

Juncker referenced the threat posed by Islamist terrorism, saying that of the 30 terror attacks in Europe since the 2004 Madrid bombing, 14 had occurred in the last year alone.

“The barbaric acts of the past year have shown us again what we are fighting for – the European way of life. In face of the worst of humanity we have to stay true to our values, to ourselves. And what we are is democratic societies, plural societies, open and tolerant.”

But just as importantly, he said “Europe needs to toughen up.”

“Soft power is not enough in our increasingly dangerous neighborhood,” he said.

To this end, he said, the EU should create a single permanent headquarters for EU military missions, and move toward building up common military assets, owned in some cases by the EU, which would operate in complement to NATO.

He said the lack of cooperation on defense issues cost EU members between 25 billion to 100 billion euros each year.

He said a new agency, the European Border and Coast Guard, would help secure the EU’s borders, and a proposed European Travel Information System would help bring about greater control over who entered the bloc.

CNN’s Stephanie Halasz and Elizabeth Roberts contributed to this report.