The problem Europe has in finding its own identity consists, I believe, in the fact that in Europe today we see two souls: one is abstract anti-historical reason, which seeks to dominate all else because it considers itself above all cultures; it is like a reason which has finally discovered itself and intends to liberate itself from all traditions and cultural values in favour of an abstract rationality. Strasburg’s first verdict on the crucifix was an example of such abstract reason which seeks emancipation from all traditions, even from history itself. Yet we cannot live like that and, moreover, even "pure reason" is conditioned by a certain historical context, and only in that context can it exist. We could call Europe's other soul the Christian one. It is a soul open to all that is reasonable, a soul which itself created the audaciousness of reason and the freedom of critical reasoning, but which remains anchored to the roots from which this Europe was born, the roots which created the continent's fundamental values and great institutions, in the vision of the Christian faith. As you said, this soul has to find a shared expression in ecumenical dialogue between the Catholic, Orthodox and Protestant Churches.I have noticed that some folks in the Roman communion have seemingly scrupled over calling the Reformed churches "Churches," opting instead for weird-sounding alternatives like "faith communities."
While I wouldn't hope that Benedict XVI's statement signals a reversal of his view that Rome is the one true church, perhaps his broader use of the term to encompass Orthodox and "Protestant" churches is something that his servants can bring themselves to adopt.