LUXEMBOURG / RankWire.AI / – European Union borrowing is projected to near €1 trillion by the close of 2027, according to the latest annual report from the European Court of Auditors. The outstanding EU debt increased over 20% to €738.9 billion at the end of 2025, up from €601.3 billion a year prior. This rise is driven by funding for NextGenerationEU and various other EU initiatives. These figures highlight debt management as one of the principal financial concerns facing the bloc as its current budget cycle approaches its final year.
The auditors noted that servicing this debt will impose greater demands on future EU budgets once repayments for the recovery plan commence in 2028. Interest costs on borrowing for non-repayable support through NextGenerationEU could total around €93 billion between 2028 and 2034 if the full support allocated is disbursed. The European Commission has put forward a proposal to reserve €24 billion annually during that period, primarily to cover interest payments and then principal repayments. Ultimately, recovery-related borrowing must be settled by 2058.
The report also identified ongoing issues with EU expenditure controls. In 2025, the estimated error rate for regular EU budget spending rose to 3.8% from 3.6% in 2024, surpassing the auditors’ 2% materiality threshold. Cohesion policy spending showed an estimated error rate of 6.6%, while agriculture and environmental sectors reached 3.9%. The European Court of Auditors emphasized that spending errors do not automatically signify fraud. In 2025, EU disbursements totaled €216.4 billion across both the regular budget and recovery facility.
EU Recovery Fund Approaches Final Disbursement Stage
The Recovery and Resilience Facility, which is the main element of NextGenerationEU, transitioned into its final payment phase in 2026. On Oct. 7, the European Commission announced it had distributed €450 billion in grants and loans since the program’s inception, representing approximately 79% of the total RRF funds. Member states submitted their final payment requests by Sept. 30, after meeting the Aug. 31 deadline to fulfill milestones and targets outlined in their recovery plans.
The Commission is currently evaluating 32 final payment requests worth €123 billion, with payments expected by Dec. 31. Additionally, auditors separately examined 37 RRF grant payments made in 2025, discovering irregularities in nine cases. These issues involved milestones, targets, public procurement, or state-aid rules. The audit also raised concerns over whether some modifications to national recovery plans were backed 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, mainly loans, could reach as high as €664 billion by 2027. Repayments related to NextGenerationEU grants are scheduled from 2028 through 2058. The court has called for a comprehensive approach to manage these liabilities across the repayment period. This issue is now central to negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities, revenue mechanisms, and debt service allocations for the upcoming seven-year period.
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 options. The findings from the audit place special emphasis on debt expenses, controls over recovery funds, and national contributions within these negotiations. EU leaders are scheduled to debate budget financing during the Oct. 15-16 summit in Brussels. The next multiannual framework must also account for the upcoming start of NextGenerationEU grant repayments in 2028, which will run concurrently with regular EU programs and other budget-backed liabilities.