European Union leaders have ended their Brussels summit without agreement on the bloc’s next seven-year budget, after German Chancellor Friedrich Merz rejected the scale of spending envisaged under the latest compromise proposal and demanded deeper cuts.
The discussions on 15–16 October exposed the continuing division between governments determined to contain national contributions and those seeking to protect agricultural subsidies, regional development and new European investment programmes. The dispute now threatens the political timetable for approving the 2028–2034 Multiannual Financial Framework, the budget that will determine the Union’s spending priorities over the next seven years.
In their formal summit conclusions, leaders invited European Council President António Costa to take negotiations forward towards a timely agreement. No new spending settlement was endorsed, despite the Irish presidency having presented revised figures immediately before the summit.
The European Commission originally proposed a framework approaching €2 trillion in current prices, arguing that Europe needed greater financial capacity to meet its growing responsibilities in defence, competitiveness, technological development, migration and external security.
Ireland, which holds the rotating Council presidency, submitted a revised negotiating document on 10 October intended to narrow the differences between governments. The latest proposal includes substantial reductions compared with the Commission’s initial ambitions while seeking to preserve financing for established EU programmes.
Those concessions have not satisfied Berlin. Merz argues that the Union must recognise the difficult fiscal position facing national governments and that the proposed increases in common spending remain excessive.
Germany, the largest contributor to the EU budget in absolute terms, has been working with other budget-conscious governments to seek reductions from the original Commission proposal.
EU Today reported on the proposed €141 billion in reductions, including the implications for defence and competitiveness funding.
The Irish compromise has done little to bridge the divide. The revised framework seeks to combine greater financial restraint with protection for agricultural and cohesion policies, while retaining significant investment in security, research and competitiveness.
Yet every attempt to rebalance the proposed spending exposes another political conflict.
The Common Agricultural Policy and cohesion funding remain among the largest and most politically sensitive components of the EU budget. Agricultural payments support farmers across the Union, while cohesion programmes finance infrastructure, regional investment and economic development, particularly in less prosperous territories.
Governments benefiting heavily from those programmes are reluctant to accept reductions, particularly when national finances are already under pressure.
France, Italy and other countries defending traditional EU expenditure have therefore resisted attempts to transfer the burden of budget restraint disproportionately onto agriculture and regional support.
At the same time, the Commission has argued that the EU cannot simply preserve the spending structure of previous decades while promising a stronger role in European defence, industrial development and economic security.
The contradiction is increasingly apparent. European governments demand greater independence from external suppliers, stronger military capabilities and sustained financial support for Ukraine, yet remain unwilling to agree on the larger common budget that might help deliver those objectives.
Cuts to research, innovation, cross-border infrastructure or defence-industrial programmes would not necessarily produce immediate political costs. Their consequences would emerge later, through investments postponed, capabilities not developed and projects left dependent on national budgets.
Conversely, reducing agricultural payments or regional investment would produce more immediate resistance from farmers, local authorities and national governments.
The demands of 17 EU governments seeking to protect farm and cohesion spending illustrate the growing tension between established programmes and the Union’s newer strategic priorities.
The Council’s budget negotiations had been intended to deliver a political agreement before the end of 2026. That would leave 2027 for the European Parliament and member states to complete the legislation required for the new financial framework to operate from January 2028.
Failure to reach that timetable would not immediately stop EU expenditure. It would, however, compress the period available for completing the detailed legal arrangements underpinning individual programmes and could complicate the uninterrupted delivery of funding at the beginning of the next budget cycle.
The political environment is hardly favourable. Several governments face difficult domestic debates over public spending, taxation and the demands of European integration. In France, the approach of the 2027 presidential election adds another complication to negotiations requiring sensitive national concessions.
Agreement on the seven-year framework requires unanimity among member states, followed by the consent of the European Parliament. The latter has already argued that the EU needs sufficient financial resources to match the responsibilities its governments have assigned to it.
Costa now faces the task of converting competing national positions into a financial settlement that all 27 governments can accept. That will require decisions not only about the overall ceiling but also about the balance between national allocations and programmes managed at European level.
The Brussels summit has demonstrated that the principal disagreements remain unresolved. The next negotiating round will determine whether governments are prepared to compromise on spending priorities or whether their ambitions for a more capable European Union will once again run ahead of their willingness to finance it.
Italy and Spain have agreed to work towards ending their reciprocal Schengen border controls following discussions between Prime Ministers Giorgia Meloni and Pedro Sánchez at the European Council summit in Brussels. Rome nevertheless extended its restrictions for another seven days on Friday, 16 October, as the two governments consider how to bring their respective measures to an end.
The decision marks a possible turning point in a dispute that has disrupted travel between two of the European Union’s largest countries since the summer. According to the notifications recorded by the European Commission, the restrictions concern air and sea connections between Italy and Spain, which do not share a land border.
The two governments have instructed their interior ministers to consider alternative arrangements over the coming week. Although neither side has formally withdrawn its measures, the agreement to coordinate their removal suggests that both capitals are seeking a way out of an increasingly uncomfortable confrontation over migration and internal European security.
The dispute began after an extraordinary influx of migrants from Morocco into Spain’s North African enclave of Ceuta in late July. More than 72,000 people crossed the border, prompting serious questions about the management of the EU’s external borders and the possibility of onward movements into other member states.
Italy responded by introducing checks on passengers arriving from Spain, arguing that the situation created risks for public order and internal security. Rome also raised concerns about the possible movement of individuals presenting security threats, although the extent of any such movement remained disputed.
Madrid rejected the justification and introduced reciprocal measures. What began as an emergency response to events on an external border consequently developed into a disagreement about whether one Schengen member could impose restrictions on another on the basis of anticipated migration movements.
EU Today examined the original Spanish retaliation in August, when the dispute first threatened to turn temporary border controls into an instrument of political pressure.
The wider consequences of the Ceuta incident have raised questions about the vulnerabilities exposed at the EU’s external border and the effectiveness of common European migration and crisis-response policy.
Schengen is built on the principle that people can travel between participating countries without routine internal border checks. Member states nevertheless retain the right to reintroduce temporary controls in response to serious threats to public policy or internal security, subject to the requirements of EU law.
The difficulty lies in determining when those exceptional powers are justified. Italy has maintained that the Ceuta crisis warranted precautionary action. Spain has argued that controls imposed specifically on travellers from its territory were unjustified and discriminatory.
These opposing positions matter beyond the two countries. If concerns over irregular arrivals in one member state become sufficient grounds for another to introduce sustained checks, the distinction between Europe’s external borders and its internal travel area becomes increasingly difficult to maintain.
The operational results have also entered the political argument. Italian figures cited during the dispute indicate that nearly half a million passengers were checked during the first month, with 31 refused entry. Those numbers demonstrate that the measures were substantial, but do not by themselves establish whether the original security concerns were proportionate to the restrictions imposed.
Madrid, meanwhile, has maintained that migrants involved in the Ceuta influx had not moved onwards to mainland Spain in the manner suggested by Italian concerns.
The latest discussions offer both governments a route towards de-escalation without formally conceding their underlying positions. Meloni can present the additional week of controls as a continuation of Italy’s security precautions, while Sánchez can point to an agreement to prepare their coordinated removal.
The two prime ministers remain politically divided on migration. Meloni has consistently argued for stronger border enforcement and deterrence, while Sánchez has defended an approach incorporating legalisation and labour-market integration for migrants already living in Spain.
Those disagreements were also visible during the Brussels summit, where European leaders returned to the question of migration management and the consequences of national decisions for the wider Union.
For Brussels, the immediate concern is whether the two governments can replace competing national restrictions with arrangements that address security concerns without unnecessarily interrupting movement between Schengen countries.
A coordinated end to the controls would not resolve the underlying problems exposed by Ceuta. It would, however, remove one of the more unusual internal consequences of that crisis and demonstrate that political negotiations can still prevent emergency border measures from becoming semi-permanent.
The decisive period is now the coming week. Whether the controls expire as planned will depend on the discussions between the Italian and Spanish interior ministries and their ability to agree practical alternatives.
European Union leaders have resisted demands for another postponement of carbon pricing for road transport and building fuels, exposing deep disagreements over climate policy, industrial competitiveness and the burden of energy costs on European households.
At the European Council summit in Brussels on 15–16 October, the Visegrad countries — Poland, Hungary, Slovakia and the Czech Republic — pressed for the second European Emissions Trading System, known as ETS2, to be delayed until 2030. Italy and Greece joined calls for greater flexibility over carbon costs, although Rome also sought a national exemption from aspects of the energy-price regime rather than simply a uniform delay. No further postponement was agreed.
The European Council conclusions call on the European Commission to update its assessment of ETS2, particularly its design and safeguards. Leaders also demanded action to reduce volatility in the existing carbon market and limit the effect of carbon prices on electricity costs.
The outcome stops short of the further postponement sought by several governments, but demonstrates how far energy affordability has moved towards the centre of European climate negotiations.
ETS2 is designed to extend the principle of carbon pricing to fuels used for heating buildings, road transport and certain smaller industrial activities. Unlike the existing Emissions Trading System, which covers large industrial installations and power generation, the new mechanism reaches sectors closely connected to everyday household expenditure.
Under the scheme, fuel suppliers must purchase allowances corresponding to the emissions associated with the fuels they sell. Households and motorists will not buy allowances themselves, but suppliers may pass those additional costs through to customers.
That distinction is fundamental. A policy designed to encourage investment in cleaner heating systems and vehicles may initially appear to consumers as an increase in petrol, diesel and domestic heating bills.
The current legislative timetable provides for ETS2 to become operational in 2028, following an earlier one-year postponement. The latest demands from several Central European governments would push that date back to 2030.
Their argument is that consumers and smaller businesses cannot reasonably be expected to absorb another source of energy-price pressure while European economies continue to contend with geopolitical uncertainty, expensive fuel and comparatively weak industrial competitiveness.
Czech Prime Minister Andrej Babiš has been particularly outspoken in his criticism, arguing that carbon pricing risks weakening Europe’s industrial base and making everyday life more expensive.
Italy has supported calls for greater flexibility, with Prime Minister Giorgia Meloni presenting the discussion as part of a wider attempt to restore competitiveness and make the transition more affordable.
The initiative encountered resistance from governments concerned that repeatedly postponing established climate legislation would weaken investment certainty and reduce confidence in European policy.
The Nordic member states have been particularly reluctant to reopen the timetable. Their position reflects a broader concern that businesses investing in clean technologies need credible long-term rules, rather than legislation liable to be revised whenever political opposition intensifies.
Carbon pricing is intended to change economic incentives gradually. Higher costs for carbon-intensive fuels are supposed to make alternatives such as better-insulated buildings, electric vehicles and cleaner heating more financially attractive.
Critics of further postponement argue that delaying implementation would also delay those incentives, potentially increasing the eventual cost of reaching the Union’s emissions-reduction targets.
Yet the opposition has exposed a weakness in that argument: consumers cannot always respond quickly to price signals. A household relying on an older heating system or a worker with no practical alternative to driving may face higher costs long before affordable low-carbon options become available.
That issue has been central to earlier discussions over ETS2. EU Today reported on stronger carbon-price safeguards in June, when European institutions moved to provide additional market intervention if allowance prices rose sharply.
Rather than endorsing a new delay, European leaders have asked the Commission to review ETS2’s economic impact and safeguards.
The summit also urged faster progress on adjustments to the Market Stability Reserve, the mechanism intended to help manage the supply of carbon allowances and prevent excessive price volatility.
Under the existing scheme, market interventions can increase or reduce allowance availability in response to defined conditions. For ETS2, safeguards are especially politically sensitive because the cost of carbon allowances may ultimately be reflected in household transport and heating expenditure.
The European Commission’s updated auction arrangements already envisage auctions of ETS2 allowances beginning in 2027, ahead of the system’s operational launch in 2028.
That timetable gives governments a relatively narrow window to settle the remaining political disputes and put protective measures into effect.
A central part of the response is the Social Climate Fund, intended to support vulnerable households, transport users and small businesses through investments in energy efficiency, cleaner heating, improved transport and temporary financial assistance.
EU Today previously examined the European Investment Bank’s €3 billion advance financing initiative, which aims to accelerate support for households before the new carbon market becomes fully operational.
The central practical question is whether such assistance reaches consumers quickly enough to offset rising costs, particularly in member states where incomes are lower and households remain heavily dependent on fossil fuels.
The ETS2 dispute is connected to a broader argument over Europe’s existing carbon market and its effects on energy-intensive industries.
Manufacturers already face substantial costs arising from electricity, fuel, regulatory requirements and international competition. Governments concerned about deindustrialisation argue that European climate policy must account more directly for these pressures.
The summit conclusions acknowledged those concerns by demanding a predictable carbon market that limits price volatility and protects industry against the relocation of production to jurisdictions with less demanding environmental rules.
At the same time, leaders reaffirmed the importance of maintaining carbon pricing as an incentive for investment and emissions reduction.
For the governments seeking a postponement, the Commission’s new assessment offers an opportunity to maintain pressure for further concessions. For governments defending the existing timetable, it provides an alternative to another politically damaging delay.
The immediate result is therefore a compromise over scrutiny rather than a change in law. ETS2 remains scheduled for 2028, while Brussels must demonstrate that its safeguards can withstand both market volatility and political opposition.
The next phase will be determined less by arguments about long-term emissions targets than by the ability of EU institutions and national governments to show households and businesses how the transition can be financed without placing disproportionate costs on those least able to adjust.
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