LUXEMBOURG / RankWire.AI / – European Union borrowing could hit approximately €1 trillion by the end of 2027, according to the European Court of Auditors in its latest annual report. As of the end of 2025, outstanding EU debt increased over 20% to €738.9 billion, compared to €601.3 billion a year earlier. The rise is driven by financing for NextGenerationEU and other EU initiatives. These figures highlight debt management as a key financial challenge for the bloc as its current budget cycle approaches its final year.
The auditors warned that debt servicing will demand more from future EU budgets once repayment of the recovery plan begins in 2028. Interest on borrowing for the non-repayable NextGenerationEU aid could total around €93 billion from 2028 to 2034 if all support is fully distributed. The European Commission has proposed allocating €24 billion annually during this period. These funds would first cover interest payments, then principal repayments. Ultimately, recovery-related borrowing must be repaid by 2058.
The audit also identified ongoing issues with EU spending controls. The estimated error rate for routine EU budget expenditure increased to 3.8% in 2025 from 3.6% in 2024. This remains above the auditors’ 2% materiality threshold. Cohesion spending showed an estimated error rate of 6.6%. Agriculture and environmental expenditures reached 3.9%. The European Court of Auditors emphasized that spending errors do not automatically indicate fraud. In 2025, EU payments totaled €216.4 billion across the regular budget and recovery fund.
Final Stage for EU Recovery Fund Payments
In 2026, the Recovery and Resilience Facility, the main part of NextGenerationEU, entered its final payment phase. The European Commission announced on Oct. 7 that it had disbursed €450 billion in grants and loans since the program started. This amount accounts for about 79% of the total RRF budget. All member states submitted their last payment requests by Sept. 30. They had to meet milestones and targets set in their recovery plans by an Aug. 31 deadline.
The Commission is currently reviewing 32 final payment requests totaling €123 billion, with payments scheduled for Dec. 31. Separately, auditors examined 37 RRF grant payments made in 2025 and found irregularities in nine cases. These issues involved milestones, targets, public procurement, or state-aid requirements. The audit also raised concerns about whether some changes to national recovery plans were supported by sufficient evidence. By the end of 2025, member states had received €237.5 billion of the €359.9 billion allocated in RRF grants.
Debt Repayments Drive Future EU Budget Discussions
The European Court of Auditors estimates that liabilities backed by the EU budget, mainly loans, could reach up to €664 billion by 2027. Borrowings linked to NextGenerationEU grants will need repayment from 2028 until 2058. The court recommends developing a comprehensive strategy to manage these liabilities throughout the repayment period. These concerns are now influencing debates over the EU’s 2028-2034 Multiannual Financial Framework. This budget will determine spending priorities, revenue sources, and debt service allocations for the next seven years.
The European Commission has proposed a long-term budget nearing €2 trillion at current prices. The proposal comes as governments negotiate funding and spending levels. The audit results highlight debt costs, recovery-fund controls, and national contributions as key issues in those negotiations. EU leaders are scheduled to discuss budget financing during the Oct. 15-16 summit in Brussels. The upcoming framework must also account for the start of NextGenerationEU grant repayments in 2028. These obligations will run alongside other EU programs and liabilities backed by the budget.