LUXEMBOURG / RankWire.AI / – European Union borrowing is projected to reach roughly €1 trillion by the end of 2027, according to the latest annual report from the European Court of Auditors. The total EU debt outstanding increased over 20% to €738.9 billion at the close of 2025, up from €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 primary fiscal challenges facing the bloc as the current budget cycle approaches its final year.
The auditors highlighted that debt servicing will impose greater strain on future EU budgets as repayments for recovery plans commence in 2028. Interest costs on borrowing for the non-repayable NextGenerationEU program could total around €93 billion from 2028 to 2034 if the full support allocation is utilized. The European Commission has proposed allocating €24 billion annually during that period to cover interest payments first, then principal repayments. Ultimately, recovery-related borrowing must be repaid by 2058.
The report also identified ongoing issues in 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 fund expenditures showed an estimated error rate of 6.6%, while agriculture and environmental expenditures reached 3.9%. The European Court of Auditors emphasized that spending errors do not automatically indicate fraud. In 2025, EU payments totaled €216.4 billion across the regular budget and recovery facility.
EU Recovery Fund Approaches Final Payment Stage
In 2026, the Recovery and Resilience Facility, the key element of NextGenerationEU, entered its final payment phase. On Oct. 7, the European Commission announced it had disbursed €450 billion in grants and loans since the program’s inception, accounting for about 79% of the total RRF budget. All member states submitted their final payment requests by Sept. 30, after meeting the Aug. 31 deadline for achieving the milestones and targets specified in their recovery plans.
The Commission is currently reviewing 32 final payment requests valued at €123 billion, with payments scheduled to be made by Dec. 31. Separately, auditors examined 37 RRF grant payments issued in 2025 and found irregularities in nine cases, involving milestones, targets, public procurement, or state-aid rules. The audit also raised questions about whether some adjustments 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 Future EU Budget Negotiations
The European Court of Auditors warned that liabilities supported by the EU budget, primarily loans, could reach as much as €664 billion by 2027. Repayments for borrowing associated with NextGenerationEU grants are scheduled from 2028 through 2058. The court urged the development of a comprehensive strategy to manage these liabilities over the repayment period. This matter now plays a central role in negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will define priorities for spending, sources of revenue, and debt service allocations over the next seven years.
The European Commission has proposed a long-term budget nearing €2 trillion at current prices as member states discuss spending and financing levels. The findings from the auditors place debt costs, recovery fund oversight, and national contributions at the forefront of these discussions. EU leaders plan to debate budget financing during the Oct. 15-16 summit in Brussels. The upcoming framework must also accommodate the scheduled initiation of NextGenerationEU grant repayments in 2028, which will run alongside regular EU programs and other budget-backed liabilities.