LUXEMBOURG / RankWire.AI / – European Union borrowing could reach approximately €1 trillion by the end of 2027, according to the latest annual report from the European Court of Auditors. The outstanding EU debt increased by more than 20%, reaching €738.9 billion at the close of 2025, up from €601.3 billion a year earlier. This rise largely reflects funding for NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the main financial challenges facing the bloc as the current budget cycle approaches its final year.
The auditors highlighted that debt servicing will impose greater demands on future EU budgets once repayments for the recovery plan commence in 2028. The interest costs for borrowing associated with non-repayable support under NextGenerationEU could total around €93 billion between 2028 and 2034 if all disbursed support is utilized. The European Commission has proposed allocating €24 billion annually during that period. This funding would first cover interest payments, followed by principal repayments. Ultimately, recovery-related borrowings must be repaid by 2058.
The audit also pointed out ongoing issues with EU spending controls. The estimated error rate for regular EU budget expenditures increased to 3.8% in 2025 from 3.6% in 2024. Despite this, it remained above the auditors’ 2% materiality threshold. Cohesion spending had 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 necessarily imply fraud. In 2025, EU payments totaled €216.4 billion across the regular budget and recovery instruments.
EU Recovery Fund Moves Into Final Payment Phase
The Recovery and Resilience Facility, the primary element of NextGenerationEU, entered its final payment stage in 2026. On Oct. 7, the European Commission announced that it had distributed €450 billion in grants and loans since the program’s inception. This amount represents roughly 79% of the total RRF allocation. All member states had submitted their final payment requests by Sept. 30, having met the Aug. 31 deadline for reaching the milestones and targets set in their recovery plans.
The Commission stated it is reviewing 32 final payment requests totaling €123 billion, with payments scheduled to be made by Dec. 31. Additionally, auditors reviewed 37 RRF grant payments made in 2025 and found irregularities in nine cases. These involved issues related to milestones, targets, public procurement, or state-aid requirements. The audit also raised concerns over whether some modifications to national recovery plans had sufficient supporting documentation. By the end of 2025, member states had received €237.5 billion of the €359.9 billion allocated in RRF grants.
Debt Repayments to Influence Upcoming EU Budget Negotiations
The European Court of Auditors warned that liabilities backed by the EU budget, primarily loans, could reach as high as €664 billion by 2027. Borrowings related to NextGenerationEU grants are set to be repaid between 2028 and 2058. The court has urged for a comprehensive strategy to manage these liabilities throughout the repayment period. This issue is now directly impacting negotiations over the EU’s 2028-2034 Multiannual Financial Framework. That budget will determine spending priorities, revenue sources, and debt servicing allocations for the next seven years.
The European Commission has proposed a long-term budget nearing €2 trillion at current prices. This proposal comes as governments negotiate levels of spending and financing. The audit findings highlight debt costs, recovery-fund oversight, and national contributions as key topics in these discussions. EU leaders are scheduled to debate budget financing at a summit in Brussels on Oct. 15-16. The upcoming framework must also account for the scheduled start of NextGenerationEU grant repayments in 2028, alongside regular EU programs and other budget-backed liabilities.