LUXEMBOURG / RankWire.AI / – European Union borrowing is projected to hit approximately €1 trillion by the end of 2027, according to the European Court of Auditors’ latest annual report. By the close of 2025, EU’s total debt outstanding had increased by over 20%, reaching €738.9 billion, compared to €601.3 billion a year earlier. This growth is largely driven by financing requirements for NextGenerationEU and other EU initiatives. The statistics highlight debt management as a primary financial concern for the bloc as the current budget cycle approaches its final year.
The auditors highlighted that servicing these debts will impose greater demands on upcoming EU budgets, particularly once repayment obligations for recovery plans commence in 2028. Interest payments on loans for the non-repayable support provided through NextGenerationEU could total around €93 billion during the period from 2028 to 2034, should the full disbursement of available assistance occur. The European Commission has suggested allocating €24 billion annually throughout this timeframe to cover interest costs initially, followed by principal repayments. Ultimately, recovery-related borrowing must be settled by 2058.
The report also identified ongoing issues with EU expenditure controls. The estimated error rate for standard EU budget expenditures increased to 3.8% in 2025 from 3.6% in 2024, surpassing the auditors’ materiality threshold of 2%. Cohesion spending was associated with 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 equate to fraud. In total, EU payments in 2025 amounted to €216.4 billion, covering both the regular budget and recovery funds.
EU Recovery Initiative Advances to Final Payment Phase
The Recovery and Resilience Facility, the core element of NextGenerationEU, transitioned into its final disbursement 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, accounting for approximately 79% of the total RRF fund. Member states submitted their last payment requests by Sept. 30, having met the Aug. 31 deadline for achieving specific milestones and targets outlined in their recovery plans.
The Commission is now reviewing 32 final payment requests totaling €123 billion, with payments scheduled to be made by Dec. 31. Separately, auditors examined 37 RRF grant payments made in 2025 and found irregularities in nine cases. These involved issues related to milestones, targets, public procurement, or state-aid requirements. Concerns were also raised about whether some adjustments 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 Repayments Influence Upcoming EU Budget Negotiations
According to the European Court of Auditors, liabilities backed by the EU budget—primarily loans—could reach as high as €664 billion by 2027. The repayment of borrowing associated with NextGenerationEU grants is scheduled between 2028 and 2058. The court has urged the development of a comprehensive strategy to address these liabilities throughout their repayment period. These issues are now central to negotiations over the EU’s 2028-2034 Multiannual Financial Framework, which will determine spending priorities, revenue sources, and debt servicing allocations for the upcoming seven years.
The European Commission has proposed a long-term budget nearing €2 trillion at current prices, as member states debate spending and financing arrangements. The findings of the audit bring debt costs, recovery fund oversight, and national contributions into sharp focus during these discussions. EU leaders are expected to address budget financing at the Oct. 15-16 summit in Brussels. The upcoming framework must also accommodate the scheduled commencement of NextGenerationEU grant repayments in 2028, which will run concurrently with regular EU programmes and other liabilities backed by the budget.