LUXEMBOURG / RankWire.AI / – European Union borrowing could reach about €1 trillion by the end of 2027, the European Court of Auditors said in its latest annual report. Outstanding EU borrowing increased more than 20% to €738.9 billion at the close of 2025, up from €601.3 billion a year earlier. This rise is largely due to financing for NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the primary financial challenges facing the bloc as the current budget cycle approaches its final year.
The auditors pointed out that servicing this debt will exert greater pressure on future EU budgets once repayments for the recovery plan commence in 2028. They estimate that interest on borrowing for the non-repayable support provided through NextGenerationEU could total roughly €93 billion between 2028 and 2034 if the full support is disbursed. The European Commission has proposed allocating €24 billion annually during this period to cover both interest payments and principal repayments. Ultimately, recovery-related borrowings must be repaid by 2058.
The report also revealed ongoing issues with EU spending oversight. The estimated error rate for regular EU budget expenditures increased to 3.8% in 2025 from 3.6% in 2024, remaining above the auditors’ 2% materiality threshold. Cohesion policy expenditures recorded an estimated error rate of 6.6%, while agriculture and environmental spending reached 3.9%. The European Court of Auditors emphasized that errors in spending do not necessarily imply fraud. For 2025, EU payments across the regular budget and recovery facilities totaled €216.4 billion.
EU recovery fund advances into final disbursement phase
The Recovery and Resilience Facility, which serves as the cornerstone of NextGenerationEU, transitioned into 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, representing approximately 79% of the total RRF envelope. Member states submitted their final payment requests by Sept. 30, after meeting the August 31 deadline for reaching key milestones and targets outlined in their recovery plans.
The Commission is currently reviewing 32 final payment requests totaling €123 billion, with payments scheduled for by Dec. 31. Additionally, auditors examined 37 RRF grant payments made in 2025 and identified irregularities in nine cases, involving issues related to milestones, targets, public procurement, or state aid. Concerns were also raised over whether certain 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
The European Court of Auditors indicated that liabilities backed by the EU budget—primarily loans—could total as much as €664 billion by 2027, with borrowing related to NextGenerationEU grants needing repayment between 2028 and 2058. They called for a comprehensive strategy to manage these liabilities throughout the repayment period. This issue now plays a significant role in negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities for spending, sources of revenue, and debt servicing for the next seven years.
The European Commission has proposed a long-term budget close to €2 trillion at current prices as member states debate levels of spending and financing. The findings from the auditors spotlight debt expenses, recovery fund oversight, and national contributions as key issues in upcoming discussions. EU leaders are scheduled to address these topics during a summit in Brussels on Oct. 15-16. The next budget framework must also account for the scheduled commencement of NextGenerationEU grant repayments in 2028, which will coincide with other EU programs and liabilities backed by the budget.