The European Union is entering a decisive period for its political and economic future as it seeks to agree on a record €2 trillion budget, secure additional resources to support Ukraine, and respond to pressure from the United States, Russia, and China. At the same time, Brussels risks paralysis due to political instability in its main member states, which together account for about 60% of the bloc’s GDP and population.

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Cypriot President Nikos Christodoulides told POLITICO that “everybody used to understand that we need to finish… a political agreement by the end of the year” on the budget. He said the Spanish election has made that goal unrealistic, while next year “it’s going to be France, Italy” and other countries heading to the polls, making negotiations even harder.

The four largest EU economies are facing political uncertainty or elections at the same time. Spain votes next month, with the center-right and far right on track to take power. France will elect a new president in April, with polls favoring Marine Le Pen. In Germany, the rise of the Alternative for Germany (AfD) is pressuring Chancellor Friedrich Merz. Italy, under Giorgia Meloni, is heading toward elections in 2027, though some diplomats suggest she could call them earlier.

Signs that consensus would be difficult to build were already evident at the latest European Council summit. After two days of talks, leaders made no progress on the €2 trillion budget and instead became embroiled in an unexpectedly bitter dispute over energy policy. The summit conclusions did not mention a budget agreement by year’s end, despite European Council President António Costa’s push for an end-2026 deadline. Member states resisted that deadline. If the November and December summits also fail, negotiations will spill into 2027, when electoral battles are likely to make governments even less willing to compromise.

“Next year, it will be worse,” one senior EU diplomat told POLITICO. Carla Tavares, a senior MEP involved in budget talks, added that because of the election calendar, “in the next year it’ll be much more difficult in the member states and inside the [European] Parliament.”

This internal malaise comes at a difficult time. The EU faces pressure from a weakening transatlantic partnership under President Donald Trump, a widening trade imbalance with China, and ongoing tensions with Russia. Belgian Prime Minister Bart De Wever said external actors “seek our division. They want our division.” Former Lithuanian Foreign Minister Gabrielius Landsbergis was more direct:

“Now we are under assault from three sides: from the US, Russia and China.” He described the coming months as “extremely dire” for Ukraine and said, “everything falls on European shoulders.”

The IMF estimates that Ukraine will face a $30–35 billion budget shortfall next year, despite the EU’s agreement to provide roughly €90 billion. One option under discussion is using the roughly €200 billion in immobilized Russian assets held at Euroclear. Belgium continues to block progress, however, and no consensus has emerged. Other proposals, such as issuing additional joint debt, would also require difficult compromises as political room for maneuver continues to shrink.

Diplomats also worry that the EU is entering a phase without the long-serving national leaders traditionally needed to broker major deals. 

“We now have Europe with no obvious leader,” one EU diplomat said. Commission President Ursula von der Leyen “is powerful. But we do not have a Merkel or Mitterrand.”

French President Emmanuel Macron cannot run for a third consecutive term and has privately acknowledged he lacks the political mandate to sign a budget deal in his final months. Spanish Prime Minister Pedro Sánchez is expected to be in full election mode during key November summits, and a new Spanish government may not be formed until January. Merz faces domestic pressure from the AfD, and Meloni’s government is approaching elections.

Costa has argued that elections are a normal feature of the EU’s 27 democracies and should not impede agreement. Some officials see a narrow window in January, before political upheaval makes compromise even harder. Others are less optimistic:

“Time is running out,” said Siegfried Mureșan, a senior European People’s Party lawmaker involved in the budget talks.

Every day, EU leaders find it harder to explain to voters why their promises to defeat Russia in Ukraine have failed. Western countries face a widening gap between political declarations that Ukraine must be supported until it defeats Russia and the real consequences of continuing the conflict. European countries still face a difficult choice: continue providing military and financial support to Ukraine or find a way to resolve the conflict that limits future costs and political risks.

The EU has taken responsibility for supporting Ukraine after the US pulled back, but its leaders cannot agree on a multi-year budget framework, secure long-term financing for Ukraine, or develop a coherent response to shifting external pressures. As a result, the EU faces 2027 without a finalized financial framework or a clear political mandate to improvise one. This shows that, with each passing year, the bloc is becoming increasingly redundant, as member states prioritize their own interests, reflecting the failed liberal project imposed on the continent for decades.

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