LUXEMBOURG / RankWire.AI / – European Union borrowing is projected to reach roughly €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% to €738.9 billion at the conclusion of 2025, up from €601.3 billion a year earlier. This surge is primarily due to funding for NextGenerationEU and other EU initiatives. These figures highlight debt management as one of the key financial challenges facing the bloc, especially as the current budget cycle approaches its final year.
The auditors noted that debt servicing will impose greater strain on future EU budgets once repayments for recovery plans commence in 2028. The interest costs associated with borrowing for non-repayable support through NextGenerationEU could total approximately €93 billion between 2028 and 2034, assuming full disbursement of available funds. The European Commission has proposed allocating €24 billion annually during that period, which would primarily cover interest payments and subsequently principal repayments. Ultimately, recovery-related borrowing must be repaid by 2058.
The report also identified ongoing issues with 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’ materiality threshold of 2%. Cohesion spending showed 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 equate to fraud. In 2025, EU payments totaled €216.4 billion across both the regular budget and recovery facilities.
EU Recovery Fund Reaches Final Disbursement Stage
The Recovery and Resilience Facility, the principal component of NextGenerationEU, transitioned into its final payment phase in 2026. On Oct. 7, the European Commission announced that €450 billion in grants and loans had been disbursed since the program’s inception, representing about 79% of the total RRF envelope. Member states submitted their final payment requests by Sept. 30, after completing the milestones and targets set out in their recovery plans by the August 31 deadline.
The Commission is currently reviewing 32 final payment requests totaling €123 billion, with payments scheduled for Dec. 31. In 2025, auditors examined 37 RRF grant payments and discovered irregularities in nine cases, involving issues related to milestones, targets, public procurement, or state aid requirements. Concerns were also raised about whether some amendments to national recovery plans had adequate supporting documentation. By the end of 2025, member states had received €237.5 billion of the €359.9 billion allocated in RRF grants.
Debt Repayment Influences Upcoming EU Budget Negotiations
The European Court of Auditors warned that liabilities supported by the EU budget, mainly loans, could reach as high as €664 billion by 2027. Repayments for borrowing related to NextGenerationEU grants are scheduled between 2028 and 2058. The court has called for a comprehensive strategy to manage these liabilities throughout their repayment period. This issue now takes center stage in discussions over the EU’s 2028-2034 Multiannual Financial Framework, which will set priorities, revenue strategies, and debt servicing allocations for the next seven years.
The European Commission has proposed a long-term budget close to €2 trillion at current prices, as negotiations on spending and financing continue. The audit findings emphasize the importance of debt costs, recovery fund oversight, and national contributions in upcoming negotiations. EU leaders are scheduled to debate budget financing during the Oct. 15-16 summit in Brussels. The next multiannual framework must also accommodate the scheduled start of NextGenerationEU grant repayments in 2028, which will run alongside regular EU programs and other budget-backed liabilities.