I'd rather be dominated in a political arena than in a military one, which is pretty much the alternative. At least as it is the small countries can throw their weight behind the larger one that has their interests most at heart.
As far as colonies are concerned, that's a very thorny issue and also even further off-topic, and for NL (where I'm from) it is a very much embarrassing issue.
I wonder if it is embarassing enough to return all the benefits of imperialist plunder to their original owners. Or pay restitution to all places where NL was involved in slave trading.
Anyway, as far as EU is concerned it is not off topic. Many of the smaller countries (even some big ones) within the EU were once seen as rightful spheres of influence/dominance by the old European imperial powers. You dont have to go outside the continent to talk about national liberation. Do you remember how WWI started?
Centralization is not without its dangers. Take for example Yugoslavia. This was a very decentralized federal republic in which constituent republics, nationalities, and autonomous regions, had a pretty big political autonomy. During late 80s Serbian politician Slobodan Milosevic led a movement that tried to centralize the government. He argued that it would make the country more efficient and better capable to address economic problems. Serbs were the numerically dominant nationality of Yugoslavia. Serbians supported centralization, non Serbs didnt. A very bloody war ensued and the country fell appart.
Diplomacy is great, but trade wars are real and between nation states trade wars are extremely nasty if one party has an economy 10 times that of the other.
So yes, there is a third option, but it isn't all that pretty either. Within the EU there are no trade wars.
As far as colonies are concerned, that's a very thorny issue and also even further off-topic, and for NL (where I'm from) it is a very much embarrassing issue.