LUXEMBOURG / RankWire.AI / – European Union borrowing is expected to hit approximately €1 trillion by the close of 2027, according to the latest annual report from the European Court of Auditors. As of the end of 2025, outstanding EU debt increased by over 20% to €738.9 billion, compared to €601.3 billion the previous year. This growth is primarily due to funding for NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the key financial concerns for the bloc as its current budget cycle nears its conclusion.
The auditors highlighted that servicing this debt will place increased pressure on future EU budgets once repayments for recovery plans commence in 2028. The cost of interest on borrowings for the non-repayable NextGenerationEU support could total around €93 billion between 2028 and 2034 if the available aid is fully distributed. The European Commission has recommended allocating €24 billion annually during this period, primarily to cover interest payments before principal repayments. Ultimately, recovery-related borrowing must be settled by 2058.
The report also underlined ongoing issues with EU spending oversight. The estimated error rate for regular EU budget expenditures increased to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Errors in cohesion spending were estimated at 6.6%, with agriculture and environmental expenses reaching 3.9%. The European Court of Auditors clarified that these spending mistakes do not necessarily indicate fraud. In 2025, EU payments totaled €216.4 billion, encompassing both the regular budget and recovery facility.
EU Recovery Fund Approaches Final Payment Phase
In 2026, the Recovery and Resilience Facility, the primary element 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 roughly 79% of the total RRF envelope. Member states submitted their final payment requests by Sept. 30, having met the Aug. 31 deadline for achieving key milestones and targets outlined in their recovery plans.
The Commission is currently reviewing 32 outstanding final payment requests worth €123 billion, with payments scheduled for by Dec. 31. In addition, auditors examined 37 RRF grant disbursements made in 2025, uncovering irregularities in nine cases. These involved issues related to milestones, targets, public procurement, or state aid compliance. The audit also raised questions about whether some modifications to national recovery plans were supported by sufficient 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, primarily loans, could reach up to €664 billion by 2027. Borrowings associated with NextGenerationEU grants will need to be repaid between 2028 and 2058. The court has called for a comprehensive plan to address these liabilities over the repayment period. This issue is now central to negotiations on the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities for spending, revenue sources, and debt servicing allocations 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 governments negotiate funding and spending levels. The audit results emphasize debt costs, recovery fund oversight, and national contributions as pivotal points in these discussions. EU leaders are expected to debate budget financing during the Oct. 15-16 summit in Brussels. The next financial framework must also factor in the scheduled start of NextGenerationEU grant repayments in 2028, which will operate alongside regular EU programs and other budget-backed liabilities.