LUXEMBOURG / RankWire.AI / – European Union borrowing might reach nearly €1 trillion by 2027, according to the latest annual report from the European Court of Auditors. By the end of 2025, the EU’s outstanding debt had grown more than 20%, reaching €738.9 billion, up from €601.3 billion a year earlier. This rise is primarily due to funding for NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the primary financial challenges for the bloc, especially as the current budget cycle approaches its final year.
The auditors emphasized that servicing this debt will exert increased pressure on future EU budgets once repayment of recovery plan loans begins in 2028. Interest payments on borrowing for the non-repayable support under NextGenerationEU could total approximately €93 billion from 2028 to 2034, assuming full disbursement of available support. The European Commission has proposed allocating €24 billion annually during this period, prioritizing interest payments before principal repayments. Ultimately, recovery-related borrowing must be repaid by 2058.
The report also highlighted ongoing concerns regarding EU expenditure controls. The estimated error rate for routine EU budget expenditures increased to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Cohesion spending had an estimated error rate of 6.6%, while agriculture and environmental allocations reached 3.9%. The European Court of Auditors clarified that spending errors do not necessarily imply fraud. In 2025, EU payments across the regular budget and recovery facility totaled €216.4 billion.
EU recovery fund moves into final disbursement phase
In 2026, the Recovery and Resilience Facility, the main part of NextGenerationEU, entered its final payment stage. On Oct. 7, the European Commission announced it had disbursed €450 billion in grants and loans since the program’s inception, representing approximately 79% of the RRF allocation. All member states submitted their final payment requests by Sept. 30, having met the Aug. 31 deadline for reaching the milestones and targets set in their recovery plans.
The Commission is currently reviewing 32 final payment requests totaling €123 billion, with payments scheduled to be made by Dec. 31. Auditors conducted separate reviews of 37 RRF grant payments made in 2025, discovering irregularities in nine cases. These issues involved milestones, targets, public procurement, or state-aid compliance. The audit also raised questions about whether some modifications to national recovery plans were adequately supported by evidence. By the end of 2025, member states had received €237.5 billion out of the €359.9 billion allocated in RRF grants.
Debt repayment issues influence upcoming EU budget negotiations
The European Court of Auditors warned that liabilities backed by the EU budget, chiefly loans, could reach as much as €664 billion by 2027. Repayments for borrowing related to NextGenerationEU grants are due between 2028 and 2058. The court has called for a comprehensive strategy to manage these liabilities throughout their repayment timeline. These issues are now central to discussions on the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities for spending, sources of revenue, and debt servicing for the next seven years.
The European Commission has proposed a long-term budget close to €2 trillion at current prices, as governments negotiate levels of spending and financing. The audit findings emphasize the importance of addressing debt costs, recovery fund oversight, and national contributions during these negotiations. EU leaders are scheduled to debate budget financing during the Oct. 15-16 summit in Brussels. The upcoming framework must also incorporate the scheduled initiation of NextGenerationEU grant repayments in 2028, which will run concurrently with regular EU programs and other liabilities backed by the budget.