The European Union enters 2025 facing a set of challenges: maintaining unity amid geopolitical tensions, improving its economic competitiveness and grappling with political uncertainty in key member states. With political turmoil in Germany and France, a new European Commission and Donald Trump returning to the White House, the year will likely put the EU's resilience under serious strain.

Closing the gap with competitors, continuing to support Ukraine in the face of Russia's war, maintaining a strong transatlantic relationship and improving overall defence capabilities are the main challenges facing the European Union in 2025.

On the eastern flank of the 27-nation bloc, Russia has been waging a full-scale war against Ukraine since 2022. A major challenge for the EU will be to continue to support Ukraine financially, militarily and diplomatically, while at the same time bolstering its own defence capabilities.

The return to power of former United States President Donald Trump in January could prove decisive. European leaders fear he could upend European security and pull the plug on support for Ukraine while simultaneously unleashing a trade war with steep tariffs on European goods.

The transatlantic relationship between the US and Europe is expected to revert to a tenser state similar to Trump's first term from 2017 to 2021. The threat of tariffs will not only have brutal economic repercussions but could undermine trust in the relationship.

Another hot topic in the EU will be the competitiveness of its economy, as the EU is increasingly lagging behind the United States and China, particularly in the areas of high-tech and innovation.

For the EU's internal politics, a particularly significant problem is the leadership vacuum in Germany and France, its two largest member states. The two states have long been regarded as the driving forces of European integration.

Another year of decisive elections
In Germany, the government led by the Social Democratic Chancellor Olaf Scholz will remain in power until the early elections scheduled for February 23. Currently favoured by the polls, the Christian Democrat Friedrich Merz stands a chance of becoming the new German chancellor.

In France, political instability followed early parliamentary elections called by President Emmanuel Macron in June. This came after the French far-right scored high in the European elections. While the far-right National Rally (RN) won the first round in the parliamentary elections, it suffered a defeat in the second round, hobbled by electoral pacts between the left and Macron's centrists.

On December 13, Macron named centrist François Bayrou as prime minister, handing him the daunting task of hauling France out of months of political crisis. Bayrou is the sixth prime minister of Macron's mandate and France's fourth prime minister of 2024. He was appointed shortly after parliament ousted former prime minister Michel Barnier's government in a historic no-confidence vote following a standoff over an austerity budget.

Meanwhile, RN President Marine Le Pen and others connected to the party are standing trial for the alleged embezzlement of EU funds by paying party employees with EU money intended to pay parliamentary assistants between 2004 and 2016. A verdict is expected to come on March 31 - the outcome is key to Le Pen's ambitions to succeed Macron as president of France in the 2027 election.

Polish Prime Minister Donald Tusk, whose country holds the rotating six-month presidency of the Council of the European Union until June, is one of those seeking to fill the Franco-German power vacuum in the EU. As are the heads of EU institutions: European Commission President Ursula von der Leyen, European Council President António Costa, and foreign policy chief and former Estonian Prime Minister Kaja Kallas along with Mark Rutte, Secretary General of the North Atlantic Treaty Organization (NATO) military alliance.

Poland is also set to hold presidential elections in May 2025.

In Romania, the first round of the presidential elections in which the pro-Russian right-wing candidate Călin Georgescu scored a surprise win, was annulled amid reports of Russian interference in the election process in early December. New elections are expected to be held in February or March.

Bulgaria also faces the task of forming a stable regular government, following two early parliamentary elections in 2024 - on June 9 and October 27. Since 2021, Bulgarians have been asked to vote seven times in just four years.

Forming a lasting majority in parliament has proven to be particularly difficult with political entities drawing hard lines on issues such as Bulgaria's role in the EU, the country's stance on the war in Ukraine and the adoption of the Euro as the national currency.

Boosting EU economic competitiveness
With regard to the bloc's ailing competitiveness, the agenda of the new Commission will largely rely on a report prepared by former President of the European Central Bank and former Italian Prime Minister Mario Draghi in September.

The Commission is expected to publish a Competitiveness Compass on January 15, which will be based on three pillars from Draghi's report: closing the innovation gap with the US and China; decarbonisation and competitiveness; and increasing economic security while reducing dependencies.

In February, the Commission is expected to unveil the Clean Industry Plan which will aim to integrate climate protection with industrial policy.

In order for the European economy to be able to compete with the United States and China, according to Draghi's report, additional investments of around 750 to 800 billion Euro annually are needed. Therefore, a key issue in the upcoming period will be how to secure these funds.

This is closely linked to the question of the next seven-year budget, known as the multiannual financial framework (MFF) for the period 2028-2034. The Commission will present a proposal for the new MFF in the second half of this year. Funds from the current seven-year budget (2021-2027) can be drawn until 2030.

Costa's innovative take on the European Council
Former Portuguese Prime Minister António Costa took the helm of the European Council on December 1 and brought a fresh wind to the institution. It is the highest political body of the EU which brings together the heads of state or government of the EU member states to define the EU's overall political direction.

One of the great novelties that 2025 brings for the European institutions will be the debut of innovative seminars devised by Costa. These will replace the informal summits of EU leaders.

The first such seminar will be held in Belgium, at a location not yet specified, on February 3. The topic on the table will be Europe's role in defence.

The Polish Council presidency has also put the emphasis on the bloc's security. The Council of the EU - not to be mistaken with the European Council - brings together ministers from each country, who meet in different configurations depending on the policy area being discussed.

Costa's seminars are designed as retreats where EU leaders can engage in brainstorming sessions to express their problems and try to find solutions together. For the first seminar, Costa has invited NATO chief Rutte to breakfast and British Prime Minister Keir Starmer to dinner.

The first formal European Council summit of 2025 will take place on March 20 and 21 in Brussels.

Four members of the European Council - from Austria, Belgium, Bulgaria, and Ireland - currently hold the status of acting leaders, as governments have yet to be formed following parliamentary elections.

Editorial note: the paragraph about the elections in Germany has been updated. The paragraph on the multiannual financial framework 2028-2034 has also been updated.

The content is based on news by agencies participating in the European Newsroom (enr, a cooperation project between news agencies from all over Europe) - in this case AFP, ANSA, BTA, EFE, HINA. AGERPRES (editor: Mariana Ionescu)