LUXEMBOURG / RankWire.AI / – European Union borrowing is projected to reach approximately €1 trillion by the end of 2027, according to the latest annual report from the European Court of Auditors. By the close of 2025, outstanding EU debt increased over 20%, amounting to €738.9 billion, compared to €601.3 billion a year earlier. This rise is driven by funding for NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the key financial challenges facing the bloc as the current budget cycle approaches its final year.
The auditors emphasized that servicing this debt will impose greater demands on upcoming EU budgets once repayments for the recovery plan commence in 2028. The interest costs associated with borrowing for non-repayable support through NextGenerationEU could total roughly €93 billion between 2028 and 2034 if disbursements are fully utilized. The European Commission has proposed allocating €24 billion annually during this period, with the funds first covering interest payments, then principal. Ultimately, recovery-related borrowing must be repaid by 2058.
The report also identified ongoing issues with 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 spending was estimated to have an error rate of 6.6%, while agriculture and environmental expenditures reached 3.9%. The European Court of Auditors clarified that spending errors do not necessarily signify fraud. In 2025, EU payments across the regular budget and recovery facility totaled €216.4 billion.
EU Recovery Fund Enters Final Payment Phase
In 2026, the Recovery and Resilience Facility, which is the primary component of NextGenerationEU, entered its final payment stage. On Oct. 7, the European Commission announced it had disbursed €450 billion in grants and loans since the facility’s inception, representing roughly 79% of the total RRF allocation. Member states had submitted all their final payment requests by Sept. 30, following the Aug. 31 deadline for reaching the milestones and targets outlined in their recovery plans.
The European Commission is currently reviewing 32 final payment requests worth €123 billion, with payments scheduled to be made by Dec. 31. Separately, auditors examined 37 RRF grant payments made in 2025 and detected irregularities in nine cases, involving issues related to milestones, targets, public procurement, or state aid. Concerns were also raised over 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 allocated in RRF grants.
Debt Repayments Influence Upcoming EU Budget Negotiations
The European Court of Auditors warned that liabilities backed by the EU budget, predominantly loans, could reach as high as €664 billion by 2027. Borrowing associated with NextGenerationEU grants will need to be repaid over the period from 2028 to 2058. The court has called for a comprehensive plan to manage these liabilities throughout the repayment timeframe. This issue is now central to discussions around the EU’s 2028-2034 Multiannual Financial Framework, which will shape spending priorities, revenue sources, and debt service allocations for the next seven years.
The European Commission has put forward a proposal for a long-term budget close to €2 trillion at current prices, as member states negotiate levels of spending and financing. The findings from the auditors focus on debt servicing costs, recovery fund oversight, and national contributions, all of which will be key points in upcoming negotiations. EU leaders are set to address budget financing during the Oct. 15-16 summit in Brussels. The next financial framework must also incorporate the scheduled start of NextGenerationEU grant repayments in 2028, which will run concurrently with other EU programs and liabilities backed by the budget.