LUXEMBOURG / RankWire.AI / – European Union borrowing could reach approximately €1 trillion by the close of 2027, according to the European Court of Auditors in its latest annual report. Outstanding debt for the EU increased over 20% to €738.9 billion at the end of 2025, up from €601.3 billion a year earlier. This rise is driven by funding for NextGenerationEU and other EU initiatives. These figures highlight debt management as a primary financial concern for the bloc as the current budget cycle approaches its final year.
The auditors highlighted that debt servicing will impose greater demands on future EU budgets once repayments for recovery plans commence in 2028. The interest costs on borrowing for support under NextGenerationEU that does not need repayment could total around €93 billion from 2028 to 2034 if disbursements are fully utilized. The European Commission has suggested allocating €24 billion annually during this period, prioritizing interest payments before principal repayments. Ultimately, recovery-related borrowing must be repaid by 2058.
The audit 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 emphasized that spending errors do not automatically imply fraud. In 2025, EU payments totaled €216.4 billion across both the regular budget and recovery facility.
EU Recovery Fund Enters Final Payment Phase
The Recovery and Resilience Facility, which is the core component of NextGenerationEU, entered its final payment stage in 2026. The European Commission announced on Oct. 7 that it had distributed €450 billion in grants and loans since the start of the facility, representing roughly 79% of the total RRF funds. Member states submitted their final payment requests by Sept. 30, having faced an Aug. 31 deadline to meet the milestones and targets set out in their recovery plans.
The Commission is currently reviewing 32 final payment requests worth €123 billion, with payments scheduled to be made by Dec. 31. Separate audits of 37 RRF grant payments made in 2025 uncovered irregularities in nine cases, involving issues related to milestones, targets, public procurement, or state aid requirements. Concerns were also raised over whether some modifications to national recovery plans were sufficiently supported by evidence. By the end of 2025, member states had received €237.5 billion of the €359.9 billion allocated in RRF grants.
Debt Repayments Influence Future EU Budget Negotiations
According to the European Court of Auditors, liabilities backed by the EU budget—primarily loans—could reach as high as €664 billion by 2027. Repayments related to NextGenerationEU grants are scheduled between 2028 and 2058. The court has called for a comprehensive strategy to manage these liabilities throughout the repayment timeline. This issue now directly impacts negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities for spending, revenue, and debt servicing for the upcoming seven-year cycle.
The European Commission has proposed a long-term budget nearing €2 trillion at current prices, as member states discuss spending and financing arrangements. The findings of the audit emphasize debt costs, recovery fund oversight, and national contributions as key topics in upcoming discussions. EU leaders are scheduled to debate budget funding during the Oct. 15-16 summit in Brussels. The next financial framework must also incorporate the beginning of NextGenerationEU grant repayments in 2028, which will run alongside existing EU programs and other budget-backed obligations.