LUXEMBOURG / RankWire.AI / – European Union borrowing could reach approximately €1 trillion by 2027, according to the European Court of Auditors in its latest annual report. As of the end of 2025, the outstanding EU debt increased by over 20%, reaching €738.9 billion, up from €601.3 billion at the same point the previous year. This surge reflects financing for NextGenerationEU and other EU programs. The figures highlight debt management as a key financial challenge facing the bloc, especially as the current budget cycle approaches its final year.
The auditors indicated that debt servicing will impose greater demands on upcoming EU budgets once repayments for recovery plans begin in 2028. The interest on borrowing for support provided through NextGenerationEU, which is non-repayable, could total about €93 billion from 2028 to 2034 if the full disbursement of available support occurs. The European Commission has suggested setting aside €24 billion annually during this period to cover interest payments first and then principal repayments. Ultimately, recovery-related borrowing must be repaid by 2058.
Persistent issues in EU expenditure controls were also identified by the auditors. The estimated error rate for regular EU budget expenditure increased to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ materiality threshold of 2%. Cohesion spending showed an error rate of 6.6%, while agriculture and environmental spending reached 3.9%. The European Court of Auditors emphasized that spending errors do not automatically imply fraud. In 2025, EU payments totaled €216.4 billion, covering both the regular budget and recovery facility.
Final Payment Stage for EU Recovery Fund Begins
The Recovery and Resilience Facility, the core component of NextGenerationEU, entered its final payment phase in 2026. On Oct. 7, the European Commission announced it had disbursed €450 billion in grants and loans since the start of the facility, representing roughly 79% of the total RRF envelope. Member states submitted their last payment requests by Sept. 30 after meeting the August 31 deadline for reaching milestones and targets outlined in their recovery plans.
The European Commission is currently evaluating 32 final payment requests totaling €123 billion, with payments scheduled to be made by Dec. 31. Additionally, auditors reviewed 37 RRF grant payments made in 2025, identifying irregularities in nine cases. These involved issues related to milestones, targets, public procurement, or state-aid compliance. The audit also raised questions about whether some modifications to national recovery plans had sufficient supporting evidence. By the end of 2025, member states had received €237.5 billion of the €359.9 billion allocated in RRF grants.
Debt Repayment Issues Influence Upcoming EU Budget Discussions
The European Court of Auditors warned that liabilities supported by the EU budget, primarily loans, could reach as high as €664 billion by 2027. Repayments for borrowing related to NextGenerationEU grants are due between 2028 and 2058. The court advocates for a comprehensive strategy to manage these liabilities throughout the repayment period. These concerns are now central to negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities, revenue sources, and debt servicing allocations for the subsequent seven years.
The European Commission has proposed a long-term budget nearing €2 trillion at current prices as member states debate spending and funding levels. The findings of the audit place debt costs, recovery fund oversight, and national contributions at the forefront of these discussions. EU leaders are scheduled to discuss budget financing during the Oct. 15-16 summit in Brussels. The upcoming budget cycle must also consider the scheduled start of NextGenerationEU grant repayments in 2028, which will run alongside regular EU programs and other liabilities backed by the budget.