EU leaders clash over energy costs as Meloni seeks fiscal flexibility

European Council leaders reached a late-night agreement on the EU carbon market (ETS) after a day of deadlock, with the text calling for an urgent review of ETS2 impacts and measures to reduce carbon price volatility while preserving the system's essential role. Italian Prime Minister Giorgia Meloni pushed for fiscal flexibility to address high energy costs, framing price surges as an external factor, but received open support only from Greece. European Commission President Ursula von der Leyen resisted, insisting on budget caution and offering only an extension of state aid rules for the energy crisis. The two-day Brussels summit also focused on the wars in Ukraine and the Middle East, with Ukrainian President Volodymyr Zelensky attending. The ETS dispute reflected broader divisions among the 27 member states over the pace of the green transition versus calls for exceptions to renewable energy policies.