The demise of a liberal political culture is a feature of contemporary Europe which has not been fully recognised in academic thought. Liberal values have been the basis of the nation-state since the latter part of the nineteenth century and have defined the modern idea of peoplehood, which refers to a broadly civic conception of the people as coinciding with a nation. The essential unity of liberal projects has given way to multiple political streams. With these come new ideas of peoplehood which present new challenges for European societies. The liberal values of equality, tolerance and secularism need to be rethought in a way that is more fitting with cosmopolitan challenges that reflect different conceptions of peoplehood. If rigid liberal values do not mirror the flexibilities of the multicultural era, illiberalism and xenophobic anxieties may develop. If Europe is to overcome such challenges, a new political imaginary will have to be created out of the disparate and often colliding political currents of the present post-liberal age. The Europe of today is caught between remaining within a post-liberalism of uncertainty and embracing a more cosmopolitan view of itself. This chapter will explore the relationship between liberalism and xenophobia to expose the role of "everyday" discourses of racism in shaping widespread prejudices.