LUXEMBOURG / RankWire.AI / – European Union borrowing is projected to hit approximately €1 trillion by the end of 2027, according to the latest annual report from the European Court of Auditors. The total of outstanding EU debt increased over 20% to €738.9 billion at the conclusion of 2025, up from €601.3 billion a year earlier. This growth largely results from financing efforts related to NextGenerationEU and other EU initiatives. These figures highlight debt management as a key financial challenge for the bloc, especially as the current budget cycle approaches its final year.
The auditors indicated that the costs associated with servicing the debt will exert greater pressure on future EU budgets once repayment of recovery plans begins in 2028. The interest expenses on borrowing for support provided through NextGenerationEU, which is non-repayable, could total around €93 billion between 2028 and 2034 if the full disbursement of available aid occurs. The European Commission has recommended allocating €24 billion annually during that period, primarily to cover interest payments, with remaining funds used for principal repayments. Ultimately, the borrowing related to recovery efforts must be repaid by 2058.
The report also highlighted ongoing issues with EU expenditure controls. The estimated error rate for routine EU budget spending increased to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Spending on cohesion policies had an error rate of 6.6%, while agriculture and environmental expenditures reached 3.9%. The European Court of Auditors emphasized that such errors do not automatically imply fraud. In 2025, EU payments across the regular budget and recovery fund totaled €216.4 billion.
Final Stage Reached for EU Recovery Fund Payments
In 2026, the Recovery and Resilience Facility, the primary element of NextGenerationEU, entered its final payment phase. On Oct. 7, the European Commission announced that it had distributed €450 billion in grants and loans since the program’s inception, representing roughly 79% of the total RRF envelope. All member states submitted their final payment requests by Sept. 30, having met the Aug. 31 deadline for achieving their recovery milestones and targets as outlined in their plans.
The European Commission is now reviewing 32 final payment requests totaling €123 billion, with payments scheduled to be made by Dec. 31. An independent audit also examined 37 RRF grant payments made in 2025, uncovering irregularities in nine cases, involving issues related to milestones, targets, public procurement, or state-aid rules. The audit further questioned whether some modifications to national recovery plans had sufficient supporting documentation. By the end of 2025, member states had received €237.5 billion out of the €359.9 billion allocated in RRF grants.
Debt Repayments to Influence Future EU Budget Negotiations
The European Court of Auditors warned that liabilities backed by the EU budget, predominantly loans, could total as much as €664 billion by 2027. The repayment of borrowing tied to NextGenerationEU grants is scheduled between 2028 and 2058. The court has called for a comprehensive approach to managing these liabilities throughout their repayment period. This issue is now directly impacting negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities, revenue strategies, and debt servicing allocations for the upcoming seven-year period.
The European Commission has proposed a long-term budget nearing €2 trillion at current prices as member states debate spending and borrowing levels. The findings from the audit emphasize the importance of debt costs, controls over recovery funds, and national contributions in these negotiations. EU leaders are expected to discuss financing at a summit scheduled for Oct. 15-16 in Brussels. The next budget framework must also incorporate the scheduled start of NextGenerationEU grant repayments in 2028, which will run concurrently with other EU programs and liabilities supported by the budget.