LUXEMBOURG / RankWire.AI / – European Union borrowing could reach approximately €1 trillion by the end of 2027, according to its latest annual report from the European Court of Auditors. The total EU debt outstanding increased over 20% to €738.9 billion by the close of 2025, up from €601.3 billion a year earlier. This rise reflects financing activities related to NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the primary financial challenges confronting the bloc as the current budget cycle approaches its final year.
The auditors indicated that debt servicing will exert greater pressure on future EU budgets once repayment of recovery plans commences in 2028. If the full support offered by the non-repayable NextGenerationEU scheme is disbursed, interest payments on borrowed funds could total around €93 billion between 2028 and 2034. The European Commission has proposed setting aside €24 billion annually during this period, primarily to cover interest and then principal repayments. Ultimately, recovery-related borrowing must be repaid by 2058.
The report also highlights ongoing issues related to EU expenditure controls. The estimated error rate for regular EU budget spending increased slightly to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Cohesion spending was found to have an estimated error rate of 6.6%, while agriculture and environmental expenditure registered at 3.9%. The European Court of Auditors emphasized that these spending errors do not automatically signify fraud. In total, EU payments in 2025 amounted to €216.4 billion, covering both the regular budget and recovery facilities.
Final Phase of EU Recovery Fund Payments Commences
In 2026, the Recovery and Resilience Facility, the core component of NextGenerationEU, entered its final payment stage. On Oct. 7, the European Commission announced that it had disbursed €450 billion in grants and loans since the program’s inception, representing about 79% of the total RRF allocation. Member states submitted their final payment requests by Sept. 30, having previously met the August 31 deadline for completing their recovery plan milestones and targets.
The Commission is currently reviewing 32 final payment requests totaling €123 billion, with payments expected by Dec. 31. In a separate audit, 37 grant payments from 2025 were examined, with irregularities found in nine cases. These issues involved milestones, targets, public procurement, or state-aid compliance. The audit also raised questions about whether some modifications to national recovery plans were adequately 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 Becoming Central to EU Budget Negotiations
According to the European Court of Auditors, EU-backed liabilities, predominantly loans, could reach as high as €664 billion by 2027. Repayments for borrowing associated with NextGenerationEU grants are scheduled from 2028 through 2058. The court has called for an integrated strategy to manage these liabilities throughout their repayment period. This issue is now directly influencing negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities for spending, revenue collection, and debt servicing for the upcoming seven-year period.
Meanwhile, 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 levels. The findings of the audit have placed a spotlight on debt costs, recovery fund controls, and national contributions during these deliberations. EU leaders are scheduled to debate budget financing during the Oct. 15-16 summit in Brussels. The upcoming framework must also factor in the start of NextGenerationEU grant repayments in 2028, which will coincide with regular EU programs and other liabilities supported by the budget.