LUXEMBOURG / RankWire.AI / – European Union borrowing could hit approximately €1 trillion by the close of 2027, as stated in the latest annual report by 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 growth reflects the financing needs of NextGenerationEU and other EU initiatives. These figures highlight debt management as a critical financial challenge for the bloc, especially as the current budget cycle approaches its final year.
According to the auditors, servicing this debt will impose greater demands on future EU budgets once repayments for the recovery plan commence in 2028. The interest payments on borrowing for the non-repayable support provided by NextGenerationEU could total roughly €93 billion during the period from 2028 to 2034 if all available support is fully utilized. The European Commission has proposed allocating €24 billion annually during those years to cover interest and principal repayments. Ultimately, recovery-related borrowing must be settled by 2058.
The report also highlights ongoing issues with EU expenditure oversight. The estimated error rate for regular EU budget spending rose slightly from 3.6% in 2024 to 3.8% in 2025, remaining above the auditors’ 2% materiality threshold. Cohesion spending saw an error rate of 6.6%, while agriculture and environmental expenditures reached 3.9%. The European Court of Auditors emphasized that errors in spending do not automatically imply fraud. In 2025, EU payments totaled €216.4 billion, covering the regular budget and recovery facility.
EU Recovery Fund Approaching Final Payment Stage
In 2026, the Recovery and Resilience Facility, the primary element 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 initiative’s inception, representing about 79% of the total RRF allocation. Member states submitted their final payment requests by Sept. 30 after meeting milestones and targets outlined in their recovery plans, which had to be completed by Aug. 31.
The Commission is currently reviewing 32 final payment requests valued at €123 billion, with payments scheduled for Dec. 31. Separately, auditors examined 37 RRF grant payments made in 2025 and identified irregularities in nine cases, involving issues related to milestones, targets, public procurement, or state aid. Concerns were also raised about 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 in allocated RRF grants.
Debt Repayments Influencing Upcoming EU Budget Negotiations
The European Court of Auditors indicated that liabilities guaranteed by the EU budget, primarily loans, could reach as high as €664 billion by 2027. Repayments for borrowing associated with NextGenerationEU grants are due between 2028 and 2058. The court has called for a comprehensive strategy to manage these liabilities throughout their repayment period. These issues are now directly influencing negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will shape spending priorities, revenue strategies, and debt servicing allocations for the upcoming seven-year cycle.
The European Commission has put forward a proposal for a long-term budget nearing €2 trillion at current prices as member states discuss spending and financing options. The findings from the audit place debt expenses, recovery fund controls, and national contributions at the forefront of these discussions. EU leaders are set to debate budget financing during the summit scheduled for Oct. 15-16 in Brussels. The next framework must also incorporate the beginning of NextGenerationEU grant repayments in 2028, obligations that will run concurrently with regular EU programs and other liabilities backed by the budget.