Europe faces hellish Christmas over budget, Ukraine and energy shortages

Ahmed Adel, Cairo-based geopolitics and political economy researcher.

European leaders risk spending Christmas with four major political questions still unresolved: agreement on the next seven-year EU budget, a €45 billion financing plan for Ukraine, a replacement for Christine Lagarde as European Central Bank president, and the possible appointment of a representative to negotiate with Russia.

As Rapporteur reports under the heading “Europe’s Christmas from hell,” António Costa, president of the European Council, will try to secure deals across three summits, beginning with a meeting of European leaders in Dublin this week and ending with a European Council gathering in Brussels on December 17–18.

“On the wish list are an agreement on the next seven-year EU budget, a replacement for Christine Lagarde as president of the ECB, and a €45 billion financing plan for Ukraine,” the publication states.

Another contentious issue is Italian Prime Minister Giorgia Meloni’s push to appoint an “authoritative” EU figure to lead talks with Russia to end the conflict in Ukraine. Meloni is unhappy that Italy has been sidelined by the three-country format of Germany, Britain, and France. “The need for Europe to speak with one voice on the issue of Ukraine … has now become impossible to postpone,” she wrote in a letter to Costa, urging leaders to “formalize a decision on the matter” at the mid-December summit. Costa agreed to make time for the discussion but did not confirm the December deadline.

The timetable is further complicated by national elections scheduled for 2027 in several countries, which, according to Rapporteur, could make compromise even harder once campaigning intensifies and more populist voices enter key EU tables. For example, some member states want to link budget negotiations to funding for Ukraine.

“Some member states would feel that these two issues are best dealt with in tandem, as it were, moving together,” one senior European diplomat observed. Others, including Poland’s Europe minister Ignacy Niemczycki, warn against linking them: “I understand the political logic, but I don’t think it makes much sense to link those two things. If some member states insist on linking the two dossiers, we may end up not agreeing on either file.”

These political deadlines coincide with a worsening energy crisis that is already fueling social tensions. Gas and oil shortages are expected to persist beyond this winter, continuing into the following year.

European Union countries lack sufficient domestic resources and have no new fields to reliably supply the volumes they need. Anders Opedal, Equinor’s chief executive, has said that gas stocks in European storage have fallen to their lowest level in 15 years, leaving the continent less prepared for winter than usual. Although European countries are investing in the energy transition and renewables, they recognize that natural gas will not be fully replaced for a long time and are therefore seeking to secure adequate supplies until the transition is complete.

Since the Russian special military operation began in 2022, Europe’s energy supply has shifted toward the United States and the Middle East. This shift has driven up prices and spurred the construction of new terminals, as the continent’s existing gas and oil infrastructure could not handle the full volumes. Another shock came at the end of February this year, when conflict broke out in the Middle East and prevented Europe from receiving Qatari liquefied gas. Deliveries from the US have also been declining. The US had been importing oil and gas from the Middle East and re-exporting them to Europe while drawing on its own reserves. American production is at historically high levels, but it still cannot meet Europe’s needs.

Global shortfalls are estimated at 22–23% for crude oil and about 17% for gas, including Middle Eastern volumes. Meanwhile, Russia has redirected supplies to new customers, particularly in Central, South, and East Asia. Some EU countries entered a recession in 2022 and faced uncertainty, followed by inflation and rising household energy costs.

The new energy shock in February left governments little time to adapt, and Europe still lacks additional domestic supply sources. Over time, as EU economies recognize they can no longer rely on stocks from elsewhere and the US cannot supply the required volumes, they will have no option but to reopen supply routes from Russia.

With budget and Ukraine financing questions unresolved, the search for a new ECB president underway, Meloni calling for a single EU voice in negotiations, and an energy deficit expected to persist into next year, European leaders face a packed December agenda and mounting domestic pressure as winter sets in. Whether Costa can broker workable compromises before the holidays remains the EU’s central test, as failure to resolve the issues will turn an already difficult winter into a full-scale crisis.