LUXEMBOURG / RankWire.AI / – European Union borrowing is projected to approach €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 by more than 20% to €738.9 billion at the conclusion of 2025, up from €601.3 billion in the previous year. This surge is primarily driven by financing needs related to NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the primary fiscal concerns for the bloc, especially as the current budget cycle approaches its final year.
The auditors emphasized that servicing this debt will exert greater pressure on future EU budgets once repayments for the recovery plan commence in 2028. If the full support allocated for NextGenerationEU is disbursed, interest payments on this non-repayable borrowing could total approximately €93 billion between 2028 and 2034. The European Commission has proposed allocating €24 billion annually during this period, to cover interest costs first and then principal repayments. Ultimately, the recovery-related loans must be settled by 2058.
The audit also revealed ongoing issues with EU expenditure controls. In 2025, the estimated error rate for routine EU budget spending increased to 3.8%, from 3.6% in 2024, still exceeding the auditors’ 2% materiality threshold. Cohesion policy spending showed an error rate of 6.6%, while agriculture and environmental expenditures reached 3.9%. The European Court of Auditors clarified that spending errors do not automatically imply fraud. In 2025, EU payments totaled €216.4 billion, covering both the regular budget and the recovery facility.
EU Recovery Fund Advances to Final Payment Phase
The Recovery and Resilience Facility, which is the main element of NextGenerationEU, entered its final payment stage in 2026. On Oct. 7, the European Commission announced that it had disbursed €450 billion in grants and loans since the program’s inception, representing around 79% of the total RRF budget. All member states submitted their final payment requests by Sept. 30, after meeting the August 31 deadline for achieving the milestones and targets set in their recovery plans.
The Commission is currently reviewing 32 final payment requests valued at €123 billion, with payments scheduled for December 31. Meanwhile, auditors examined 37 RRF grant payments made in 2025 and found irregularities in nine cases, which involved issues related to milestones, targets, public procurement, or state aid rules. Concerns were also raised about 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 their €359.9 billion in allocated RRF grants.
Debt Repayments Become Central to EU Budget Discussions
The European Court of Auditors reported that liabilities secured through the EU budget, primarily loans, could reach as high as €664 billion by 2027. Repayments for borrowing tied to NextGenerationEU grants are scheduled between 2028 and 2058. The court has urged the development of a comprehensive strategy to manage these liabilities throughout the repayment period. This issue is now at the forefront of negotiations for the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities for spending, revenue, and debt servicing for the next seven years.
The European Commission has put forward a proposal for a long-term budget nearing €2 trillion at current prices, as member states negotiate their financial commitments. The findings from the audit place debt expenses, recovery fund oversight, and national contributions at the heart of the upcoming discussions. EU leaders are scheduled to address budget funding during the Oct. 15-16 summit in Brussels. The next financial framework must also consider the commencement of NextGenerationEU grant repayments in 2028, which will run alongside existing EU programs and other liabilities supported by the budget.