European Union leaders are meeting in Brussels on Thursday to begin two days of talks that will focus on some of the major economic challenges facing the bloc, including competition from China.

The summit is sure to include some heated debate over the bloc's budget for the years 2028 to 2034, with the usual divisive negotiations between net contributors and net recipients.

On Friday, leaders are set to discuss further support for Ukraine as it faces a full-scale Russian invasion, with Ukrainian President Volodymyr Zelenskyy due to attend.

Here are the main topics on the agenda:

Chinese competition in focus

The leaders are expected to discuss ways to remedy the bloc's massive trade deficit with China, which reached €360 billion ($400.4 billion) last year and is set to exceed that level this year. 

The meeting comes less than a week after the bloc's executive body, the European Commission, reached an agreement with Beijing to curb imports of hybrid cars from China.

EU leaders called for instruments to address the bloc's trade imbalances after its trade deficit climbed to €1 billion ($1.12 billion) a day. In a joint statement, they also called on the European Commission "to urgently enhance the EU toolbox with new instruments to better address these imbalances." 

The EU has accused China of unfair economic practices, saying its state subsidies for its industries are creating an unlevel playing field.

Industry groups say the surge in imports from China is leading to an increasing number of factory closures in the bloc.

Ahead of the meeting, German Chancellor Friedrich Merz and French President Emmanuel Macron called for new EU measures to counter any actions leading to market distortion.

The leaders will, however, also be looking at soaring energy prices within the bloc as another factor weighing on its competitiveness.

Divisive EU budget

The bloc's next seven-year budget from 2028 to 2034 is also set to be another controversial issue on the agenda, ahead of a special summit set for November to try to reach agreement.

Discussions on the budget, which requires unanimous approval, are often intense, with divisions between wealthier states and those that rely on EU cohesion funds.

"We are in very, very difficult negotiations regarding the future finances of the European Union," German Chancellor Friedrich Merz, who has been leading the appeals for a leaner budget, said on arrival in Brussels. 

"We must significantly reduce the common budget compared with the commission’s proposals. No member state of the European Union can afford this," said Merz.

Swedish Prime Minister Ulf Kristersson also said the proposals currently on the table were "simply not acceptable." 

Italy's Giorgia Meloni is among the most vocal defenders of maintaining the traditional funds like cohesion payments, she told parliament on Wednesday that she saw "no contradiction between old policies and new priorities." 

The talks at the summit are not expected to bring any breakthrough, but leaders are hoping to reach a compromise by the end of the year.

Pressure to finalize the budget is growing ahead of elections next year in several member states that could make it even more difficult to reach a deal acceptable to all.

Ukraine support

The EU leaders are expected to turn their attention to the situation in Ukraine on Friday, with Ukrainian President Volodymyr Zelenskyy invited to join the meeting.

"All of us in Europe want this war to end," Zelenskyy wrote after arriving. "And for that to happen, strong signals are needed — more real pressure on Russia and more defense support for Ukraine."

He is likely to urge the bloc to up its support for Kyiv as Russia intensifies its strikes ahead of winter, killing dozens of civilians.

European aid is taking on ever more importance as the US under President Donald Trump continues its ambivalent path with regard to the conflict, as reflected in a recent deal securing Russian diesel imports despite international sanctions.

Trump has also called for Zelenskyy to be replaced as Ukrainian leader.

Edited by: Natalie Muller and Wesley Dockery

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