LUXEMBOURG / RankWire.AI / – European Union borrowing is projected to reach approximately €1 trillion by the end of 2027, according to the European Court of Auditors in its latest annual report. By the end of 2025, the outstanding EU debt increased by over 20%, reaching €738.9 billion, up from €601.3 billion a year earlier. This surge is driven by financing needs related to NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the primary financial concerns 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 repayments for the recovery plan commence in 2028. If the full disbursement of available support occurs, interest payments on borrowing for non-repayable NextGenerationEU aid could total roughly €93 billion between 2028 and 2034. The European Commission has proposed allocating €24 billion annually during that period to cover interest costs first, followed by 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 regular EU budget spending increased to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Cohesion spending’s error rate was estimated at 6.6%, while agriculture and environmental expenditures reached 3.9%. The European Court of Auditors clarified that errors in spending do not necessarily indicate fraud. In 2025, EU payments totaled €216.4 billion across the regular budget and recovery facilities.
EU Recovery Fund Enters Final Disbursement Stage
The Recovery and Resilience Facility, the core element of NextGenerationEU, entered its final payment phase in 2026. On Oct. 7, the European Commission announced that it had disbursed €450 billion in grants and loans since the initiative’s inception, representing about 79% of the total RRF envelope. All member states submitted their final payment requests by Sept. 30 after meeting the Aug. 31 deadline to reach milestones and targets outlined in their recovery plans.
The Commission is currently reviewing 32 final payment requests totaling €123 billion, with payments scheduled for Dec. 31. In addition, auditors examined 37 RRF grant payments made in 2025 and found irregularities in nine cases. These issues involved milestones, targets, public procurement, or state-aid requirements. The audit also raised concerns over whether some modifications 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 Influence Upcoming EU Budget Negotiations
The European Court of Auditors warned that liabilities supported by the EU budget, primarily loans, could reach as high as €664 billion by 2027. Repayments for borrowing linked to NextGenerationEU grants are scheduled from 2028 through 2058. The court advocates for a comprehensive strategy to manage these liabilities throughout the repayment period. This issue is now central to negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will determine spending priorities, revenue streams, and debt servicing allocations for the next seven-year cycle.
The European Commission has proposed a long-term budget approaching €2 trillion at current prices as member states debate spending and financing strategies. The audit findings highlight debt costs, recovery fund oversight, and national contributions as key topics for discussion. EU leaders are expected to address budget financing during the Oct. 15-16 summit in Brussels. The next budget framework must also account for the scheduled initiation of NextGenerationEU grant repayments in 2028, which will run concurrently with regular EU programs and other liabilities backed by the budget.