LUXEMBOURG / RankWire.AI / – European Union borrowing could reach approximately €1 trillion by the end of 2027, according to the latest annual report from the European Court of Auditors. By the end of 2025, outstanding EU debt had increased by over 20%, reaching €738.9 billion, up from €601.3 billion a year earlier. This surge is attributed to financing for NextGenerationEU and other EU initiatives. The data highlights debt management as a key financial challenge for the bloc as the current budget cycle approaches its final year.
The auditors emphasized that debt servicing will impose greater demands on future EU budgets as repayments for recovery plans commence in 2028. If the full disbursement of available support occurs, interest costs on borrowing for non-repayable NextGenerationEU aid could total around €93 billion from 2028 to 2034. The European Commission has proposed allocating €24 billion annually during that period. These funds would initially cover interest payments and subsequently principal repayments. Ultimately, recovery-related borrowing must be settled by 2058.
The report also identified ongoing issues with EU expenditure controls. The estimated error rate for regular EU budget spending increased to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Cohesion spending showed an estimated error rate of 6.6%, while agriculture and environmental expenditures reached 3.9%. The European Court of Auditors clarified that spending errors do not necessarily imply fraud. In 2025, EU payments totaled €216.4 billion, including both regular budget and recovery facility disbursements.
EU Recovery Fund Enters Final Payment Phase
In 2026, the Recovery and Resilience Facility, the primary element of NextGenerationEU, transitioned into 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 about 79% of the total RRF envelope. Member states submitted their last payment requests by Sept. 30, having met the Aug. 31 deadline to complete the milestones and targets specified in their recovery plans.
The Commission is currently reviewing 32 final payment requests valued at €123 billion, with payments scheduled for Dec. 31. Separately, auditors examined 37 RRF grant payments made in 2025, identifying irregularities in nine cases involving milestones, targets, public procurement, or state aid requirements. The audit also raised concerns about whether some modifications to national recovery plans were supported by sufficient documentation. By the end of 2025, member states had received €237.5 billion of the €359.9 billion allocated in RRF grants.
Debt Repayments Influencing Future EU Budget Discussions
The European Court of Auditors stated that liabilities supported by the EU budget, primarily loans, could reach as high as €664 billion by 2027. Borrowings associated with NextGenerationEU grants are due for repayment between 2028 and 2058. The court has called for a comprehensive strategy to manage these liabilities throughout the repayment period. This issue is now directly impacting negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will determine spending priorities, revenue mechanisms, and debt service allocations for the upcoming seven-year cycle.
The European Commission has proposed a long-term budget nearing €2 trillion at current prices, as member states negotiate spending and financing levels. The findings from the audit emphasize the importance of managing debt costs, recovery fund oversight, and national contributions during these discussions. EU leaders are set to debate budget financing at the Oct. 15-16 summit in Brussels. The next framework must also incorporate the scheduled start of NextGenerationEU grant repayments in 2028, which will run concurrently with other EU programs and liabilities supported by the budget.