EUROPEAN UNION - NEW WAVE OF REACTION ON ENERGY, HOUSING, INCOMES - Filenews 25/10 by Petra Argyrou
Fires, barricades, tear gas, clashes with the police and curfews. From the streets of Paris to Milan's Duomo Square, the images of the last few days capture a Europe that is boiling.
In Lisbon, thousands of citizens are protesting against low wages and unaffordable housing costs, while in Brussels, social discontent is overflowing against the backdrop of cuts and rising living costs. In Spain, protesters remain on the streets ahead of early elections in November, demanding cheaper rents and affordable housing.
Behind the images of unrest, a deeper crisis emerges, with economic, political and social ramifications. The sword of Damocles of high prices and energy costs continues to cast a shadow over households and businesses, while some governments lack the fiscal space for bold support measures.
Added to this explosive scene are the political uncertainty ahead of the 2027 elections in EU countries, the deep disagreements over the new seven-year budget of the European Union and the geopolitical upheavals that exacerbate economic pressures.
At this critical juncture, the great challenge for the "27" is not only the management of the multiple crises, but the preservation of the cohesion of the European Union itself. But does Europe have the political and economic stamina to break out of the cycle?
Economies under pressure
Behind the social unrest is the struggling European economy, which is teetering on the back of the uncertainty of wars. Growth appears fragile, while the fiscal obligations of states limit the possibilities for substantial relief for households from high prices.
The resurgence of inflationary pressures is also reflected in the latest Eurostat data. In September, Eurozone inflation climbed to 3.8%, with energy having played the most decisive factor in the rise. The European Central Bank's forecasts for growth, which will rise to just 0.9% for 2026, are also skeptical.
It is obvious that, as long as the outcome of the conflict in the Middle East remains uncharted, energy prices will be affected, as will the economic prospects.
Adding to the intractable puzzle is public debt, with Greece, Italy, France, Belgium and Spain at the top of the list of over-indebted. Italy is expected to record a debt of 138.1% of GDP, Greece 136.7%, France 119.3% and Belgium 110.7%, while in Spain the government target is set at 99.1%.
Cyprus, fortunately, is on the opposite path, with public debt estimated to fall to 48.9% of GDP in 2026.
Political storm ahead of 2027
The difficult economic situation is made even more complicated by politics. Europe is entering political turmoil from next month, with the upcoming elections threatening to upset the balance in strong member states, at a time when social disappointment intensifies the pressure on governments. 2027 is foreshadowed as a year of significant political upheavals.
In France, the countdown to Emmanuel Macron's departure and the presidential elections in April has already begun. His popularity is at an all-time low, the French parliament is fragmented and the obstacles to approving the state budget seem insurmountable for the time being. And the explosion of social anger does not leave much room for political maneuvering, while Marine Le Pen and Jean-Luc Mélenchon seize the opportunity and attempt to capitalize on the discontent.
On the other hand, Germany is also shifting from upheaval to upheaval. Chancellor Friedrich Merz sees the rug coming off from under his feet. The strengthening of the "Alternative for Germany" (AfD) in the regional elections has sparked intra-party controversy and discomfort with the economic reforms it is promoting. On top of that, the political confrontation extends to the attitude towards Russia. The AfD and Sarah Wagenknecht's party are demanding an end to German military aid to Ukraine.
In Spain, too, there is political uncertainty with the polls being set up earlier. Pedro Sánchez has called early parliamentary elections for November 29 due to his government's inability to secure the necessary parliamentary majority. Efforts to form a united pre-election front are facing difficulties, due to the split of the country's left-wing political forces.
The political situation in Italy is also tense. Giorgia Meloni has succeeded in changing the electoral law, but has sparked opposition reactions. Under the new electoral system, a coalition of parties with more than 42% of the vote will be able to secure additional parliamentary seats to facilitate the formation of a government. The opposition complains that the change in the electoral law hides expediencies in favor of Meloni.
Greece and Poland are also entering election fever in 2027, with the contests gaining wider European weight.
The budget of the conflict
The new seven-year EU budget for the period 2028-2034 has become a field of fierce controversy. The "27" are in the two straits, as they are called upon to finance new costly priorities, with net contributors demanding cuts and "Friends of Cohesion" resisting cuts in European funds.
The Irish presidency attempted to bridge the gap by tabling on October 10 a revised proposal of €1.62 trillion, in 2025 prices, reduced by €141 billion. or 8% compared to the corresponding proposal of the Commission.
However, the Irish cuts were not enough either. Germany, Sweden and the Netherlands continue to consider the bill excessive, while the opposing camp insists on safeguarding funds for agriculture and regional development.
The gap proved to be unbridgeable at the Summit of October 15 and 16. The leaders did not reach an agreement, instructing the president of the European Council, Antonio Costa, to continue the negotiations.
European sources of revenue are a new field of controversy. The Commission proposes levies from large companies with an annual turnover of more than €100 million, from the revenues of emission allowances and the taxation of products imported into the EU. The list also includes levies from excise duties on tobacco products and from electrical and electronic appliances that are not recycled.
The suggestions, however, cause new friction. The burden on large companies has already met with reactions, while there are countries that are also opposed to the allocation of revenues from pollutants to the EU budget. Alternative proposals for taxing digital services, online gambling and cryptocurrencies are back on the table. Finding a compromise becomes even more difficult, as the approval of the new own resources requires unanimity of the member states.
The time limits, however, are dangerously narrowing. Without a political agreement by the end of 2026, there is a risk that the adoption of the necessary legislation in 2027 and by extension the unhindered funding of European programs from January 2028 will be delayed.
Each country left to its fate and its possibilities
With different measures, weights and possibilities, European governments are trying to stem the wave of high prices. The scope for social support varies significantly from country to country. And Europe seems to be losing the bet. Economic austerity and budgetary constraints are deepening the rift between states and making it difficult to find common European solutions.
However, the data provided by the European Commission last May are sensational. The measures adopted by the states in the first four months of 2026 were estimated at €14.5 billion, while their extension until the end of the year is estimated to skyrocket the fiscal cost to €38.6 billion. The Commission insists that 75% of the money does not go to vulnerable households or businesses with high energy costs. On the contrary, it finds that they are available through generalized tax relief.
The Summit of 15-16 October ended without an agreement and tangible measures to relieve the citizens. The "27" leaders limited themselves to acknowledging the need for a coordinated European response, referring the consideration of additional measures to the Commission.
After Italy, which managed to reach an agreement in principle with Brussels on a mechanism to limit the impact of expensive natural gas on electricity prices, four other states (Poland, the Czech Republic, Slovakia and Hungary) in a joint declaration are asking for exemptions to use European funds to support their industries.
Demonstrations in continuity...
The economic hardship is now turning into a social explosion. The mobilizations that are shaking Europe do not have the same starting points everywhere. The common denominator, however, is the anxiety of citizens about their standard of living and the increasing questioning of the effectiveness of governments.
In France, the anger, initiated by pupils and students over the underfunding of education, embraced wider social strata. About 550,000 citizens participated in the mobilizations of October 17.
The housing crisis plaguing Spain has brought citizens to the streets, with hundreds of protest tents set up in Madrid's central square.
In Portugal, authorities went so far as to evacuate protest camps in Lisbon and Porto, with 55 arrests. The reactions to the cost of living were also brought to the fore by the mobilizations in Belgium and Italy.
New demonstrations are planned for this weekend, with governments and security forces sitting on hot coals.
