LUXEMBOURG / RankWire.AI / – European Union borrowing may reach approximately €1 trillion by the end of 2027, according to the latest annual report from the European Court of Auditors. Total EU debt outstanding increased by over 20% to €738.9 billion at the close of 2025, up from €601.3 billion a year earlier. This growth is driven by funding for NextGenerationEU and other EU initiatives. These figures highlight debt management as a key financial challenge for the bloc as the current budget cycle approaches its final year.
The auditors noted that servicing the debt will place increased strain on future EU budgets once repayments for the recovery plan commence in 2028. Interest payments on borrowing related to non-repayable support from NextGenerationEU could total around €93 billion between 2028 and 2034 if all available support is fully allocated. The European Commission has proposed reserving €24 billion annually during this period, primarily to cover interest costs first, followed by principal repayments. Ultimately, recovery-related borrowing must be settled by 2058.
The report also identified ongoing issues in EU expenditure controls. The estimated error rate for regular EU budget spending increased to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Cohesion funding showed an error rate of 6.6%, while agriculture and environmental expenditures reached 3.9%. The European Court of Auditors emphasized that such spending errors do not automatically imply fraud. In 2025, EU payments totaled €216.4 billion across both the regular budget and recovery facility.
Final Phase of EU Recovery Fund Payments Begins
The Recovery and Resilience Facility, the primary 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 initiation of the facility, representing about 79% of the total RRF funds. Member states submitted their last payment requests by Sept. 30 after meeting the Aug. 31 deadline to fulfill the milestones and targets set out in their recovery plans.
The Commission is currently reviewing 32 final payment requests totaling €123 billion, with disbursements expected by Dec. 31. Separately, auditors examined 37 RRF grant payments made in 2025 and found irregularities in nine cases. These issues involved milestones, targets, public procurement, or state aid requirements. 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 of the €359.9 billion allocated in RRF grants.
Debt Repayments Influence Upcoming EU Budget Negotiations
According to the European Court of Auditors, liabilities secured by the EU budget—mainly loans—could reach as high as €664 billion by 2027. Repayments for borrowing associated with NextGenerationEU grants are scheduled from 2028 through 2058. The court has urged the development of a comprehensive strategy covering these liabilities across the entire repayment period. This issue now plays a central role in discussions over the EU’s 2028-2034 Multiannual Financial Framework, which will shape spending priorities, revenue streams, and debt servicing 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 governments negotiate levels of expenditure and financing. The audit results highlight debt costs, recovery-fund oversight, and national contributions as focal points of these negotiations. EU leaders are set 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 run alongside existing EU programs and other liabilities backed by the budget.