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. Outstanding debt for the EU increased over 20% to €738.9 billion at the close of 2025, up from €601.3 billion a year earlier. This surge is largely driven by financing needs related to NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the primary financial challenges confronting the bloc as its current budget cycle approaches its final year.
The auditors highlighted that debt servicing will exert increased pressure on future EU budgets once repayments for recovery plans commence in 2028. If fully disbursed, interest payments on borrowing for non-repayable support through NextGenerationEU could total around €93 billion between 2028 and 2034. The European Commission has proposed allocating €24 billion annually during this period, prioritizing interest payments first, then principal repayments. Ultimately, recovery-related borrowings must be repaid by 2058.
The report also points to ongoing issues with EU expenditure controls. The estimated error rate for regular EU budget spending rose to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Cohesion policy expenditures faced an estimated error rate of 6.6%, while agriculture and environmental spending reached 3.9%. The European Court of Auditors emphasized that spending errors do not necessarily imply fraud. In 2025, EU payments totaled €216.4 billion, encompassing both the regular budget and recovery facility.
Final Payment Phase Underway for EU Recovery Fund
The Recovery and Resilience Facility, the primary element of NextGenerationEU, entered its last payment stage in 2026. On Oct. 7, the European Commission announced that it had disbursed €450 billion in grants and loans since the program’s inception, representing roughly 79% of the total RRF allocation. Member states submitted their final payment requests by Sept. 30, having met an August 31 deadline to complete milestones and targets outlined 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. Separately, auditors examined 37 RRF grant payments made in 2025, uncovering irregularities in nine cases involving milestones, targets, public procurement, or state-aid requirements. The audit also raised concerns about whether some amendments 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 warned that liabilities backed by the EU budget, primarily loans, could reach as high as €664 billion by 2027. The repayment of borrowing tied to NextGenerationEU grants is scheduled between 2028 and 2058. The court has called for a comprehensive strategy to manage these liabilities throughout their repayment period. This issue is now central to negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will set spending priorities, revenue sources, and debt servicing allocations for the next seven years.
The European Commission has proposed a long-term budget close to €2 trillion at current prices, as member states debate spending and financing arrangements. The findings from the audit emphasize debt costs, controls over recovery funds, and national contributions as key topics in upcoming discussions. EU leaders are set to address budget financing at the Oct. 15-16 summit in Brussels. The next financial framework must also factor in the scheduled start of NextGenerationEU grant repayments in 2028, which will operate alongside regular EU programs and other budget-backed liabilities.