LUXEMBOURG / RankWire.AI / – European Union borrowing may reach approximately €1 trillion by the conclusion of 2027, according to the latest annual report from the European Court of Auditors. Total outstanding EU debt increased by over 20%, reaching €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 various other EU initiatives. These figures highlight debt management as a key financial challenge for the bloc as the current budget cycle approaches its final year.
The auditors emphasized that servicing this debt will impose greater demands on future EU budgets once repayment for recovery plans commences in 2028. Interest costs on borrowing related to the non-repayable support from NextGenerationEU could total around €93 billion between 2028 and 2034 if all disbursed support is utilized. The European Commission has recommended allocating €24 billion annually during that period, covering interest payments first and then principal repayments. Ultimately, recovery-related borrowing must be repaid by 2058.
The report also identified ongoing issues with EU expenditure controls. The estimated error rate for routine EU budget spending rose to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Cohesion fund expenditures had an estimated error rate of 6.6%, while agriculture and environmental spending reached 3.9%. The European Court of Auditors clarified that spending errors do not necessarily imply fraud. In 2025, EU payments totaled €216.4 billion, covering both the regular budget and recovery fund.
Final Stage of EU Recovery Fund Disbursements Begins
The Recovery and Resilience Facility, the core element of NextGenerationEU, entered its final disbursement phase in 2026. On Oct. 7, the European Commission announced that it had distributed €450 billion in grants and loans since the start of the program, representing about 79% of the total RRF budget. Member states submitted their last payment requests by Sept. 30 after meeting the August 31 deadline for achieving milestones and targets outlined in their recovery plans.
The Commission is currently reviewing 32 final payment requests totaling €123 billion, with payments scheduled by Dec. 31. Additionally, auditors examined 37 RRF grant payments made in 2025 and found irregularities in nine cases, involving milestones, targets, public procurement or state-aid compliance. Concerns were also raised about whether some modifications to national recovery plans had adequate 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 Influencing Future EU Budget Discussions
The European Court of Auditors highlighted 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 due between 2028 and 2058. The court has urged for a comprehensive strategy to manage these liabilities throughout the repayment period. This issue now plays a significant role in negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will set spending priorities, revenue sources, and debt servicing plans 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 debate spending and financing levels. The findings from the audit emphasize debt costs, recovery fund oversight, and national contributions as central topics in these discussions. EU leaders are scheduled to discuss budget financing during the Oct. 15-16 summit in Brussels. The new framework must also accommodate the scheduled start of NextGenerationEU grant repayments in 2028, which will run concurrently with regular EU programs and other budget-backed liabilities.