LUXEMBOURG / RankWire.AI / – European Union borrowing could hit approximately €1 trillion by the end of 2027, according to its 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, compared to €601.3 billion a year earlier. This rise is attributed to financing for NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the primary financial challenges 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 once repayment of recovery plan loans begins in 2028. Interest expenses related to borrowing for non-repayable support under NextGenerationEU could total around €93 billion between 2028 and 2034 if the full disbursement of available support occurs. The European Commission has proposed allocating €24 billion annually during that period to cover interest payments first, followed by principal repayments. Ultimately, recovery-related borrowings must be repaid by 2058.
The report also highlighted ongoing issues in 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 funds experienced an estimated error rate of 6.6%, while agriculture and environmental expenditures reached 3.9%. The European Court of Auditors clarified that errors in spending do not necessarily 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
In 2026, the Recovery and Resilience Facility, the primary component of NextGenerationEU, moved 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 roughly 79% of the total RRF allocation. All member states submitted their final payment requests by Sept. 30, having met the Aug. 31 deadline to fulfill milestones and targets outlined in their recovery plans.
The European Commission is currently reviewing 32 outstanding final payment requests worth €123 billion, with these payments scheduled for Dec. 31. Additionally, auditors reviewed 37 RRF grant disbursements made in 2025, uncovering irregularities in nine cases involving milestones, targets, public procurement, or state-aid compliance. Concerns were also raised over whether some changes 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 Repayments Drive Future EU Budget Negotiations
The European Court of Auditors noted that liabilities backed by the EU budget, primarily loans, could reach as high as €664 billion by 2027. Repayments for borrowing related to NextGenerationEU grants are scheduled between 2028 and 2058. The court has urged the development of 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 determine future spending priorities, revenue streams, and debt servicing allocations for the next seven years.
The European Commission has proposed a long-term budget nearing €2 trillion at current prices, as member states negotiate spending and financing arrangements. The findings from the audit emphasize the importance of debt costs, recovery fund oversight, and national contributions in these discussions. EU leaders are scheduled to debate budget financing at the Oct. 15-16 summit in Brussels. The upcoming multiannual framework must also factor in the scheduled start of NextGenerationEU grant repayments in 2028, which will run concurrently with regular EU programs and other budget-backed obligations.