The European Union's ballooning debt could blow a hole in the bloc's next seven-year budget unless governments agree on new sources of revenue, the European Court of Auditors (ECA) warned on Thursday — with EU borrowing projected to reach €1 trillion by 2027, largely because of the debt taken on to fund the post-pandemic recovery. The warning lands just as EU leaders prepare to negotiate the 2028–2034 budget next week.
According to the auditors, the EU's debt has "more than tripled in only a few years", reaching €739 billion by the end of 2025, Pierre Moscovici, a member of the Court of Auditors, told reporters, as reported by Free Malaysia Today.
Contents
- What the auditors found
- The €2 trillion budget fight
- Trouble inside the recovery fund
- Key takeaways
- Frequently Asked Questions
- Sources
- Related reading
What the auditors found
In their annual report, the Luxembourg-based auditors warned that the EU's rising debt burden "could weigh heavily on future budgets". The bloc could be spending up to €93 billion on interest payments alone, they said — money that would otherwise fund programmes across the 27 member states.
The debt mostly stems from the massive borrowing programme the EU launched to restart its economy after the Covid pandemic: the NextGenerationEU recovery package, whose centrepiece, the Recovery and Resilience Facility (RRF), amounted to €360 billion in grants and €213 billion in loans, disbursed to member states according to how badly they were affected and on condition they met pre-agreed green and digital reforms.
"The auditors therefore urge caution in respect of future budgets: without an agreement on new sources of revenue, the EU budget could face a significant shortfall, forcing difficult choices such as higher national contributions and lower ambitions," the ECA said.
The €2 trillion budget fight
EU capitals are locked in their usual battle over the next long-term budget. The European Commission proposed a budget worth around €2 trillion last year, including plans to raise money from new taxes on large companies, environmental taxation and levies on tobacco.
So-called "frugal" nations, including Germany, are pressing for cuts, while higher-spending countries like France want more flexibility. Ireland, which holds the rotating EU presidency, is due to present its latest proposal on Saturday, and European leaders will discuss the package next week.
Trouble inside the recovery fund
The auditors' findings add to growing scrutiny of how recovery money has been spent. The European Public Prosecutor's Office is investigating 512 potential cases of fraud in the spending of RRF funds, according to its latest report.
The ECA also noted that the RRF differs sharply from traditional EU spending: payments are not linked to actual costs, and compliance with EU and national rules is not a condition for payment. Nine of the 37 recovery-fund grant payments made in 2025 failed to meet stipulated rules or conditions — yet the payments were made. More than €122 billion in recovery-fund grants — over a third of the total — remained unpaid as the programme entered its final year, with France, Austria and Croatia the only countries to have received at least 80% of their allocated grants.
The Commission defended the model, arguing it carries a low financial risk because payments are linked to checks on whether governments have met agreed milestones, and saying it can withhold part or all of a payment when requirements are not met.
The scrutiny comes as Brussels weighs extending the RRF-style, milestone-based funding model into the next budget cycle — an approach the auditors found problematic, noting that some governments had been permitted to change commitments after payments were already requested.
Key takeaways
- The European Court of Auditors warns EU debt could reach €1 trillion by 2027, with up to €93 billion spent on interest payments alone.
- Without agreement on new revenue sources — new corporate taxes, green levies, tobacco duties — the 2028–2034 budget could face a significant shortfall.
- The Recovery and Resilience Facility (€360bn in grants, €213bn in loans) faces fraud probes: 512 potential cases are under investigation, and over €122bn in grants remain unpaid.
- "Frugal" states led by Germany want cuts; leaders meet next week after Ireland presents its proposal on Saturday.
Frequently Asked Questions
Why has EU debt grown so fast?
The debt more than tripled in a few years because of the massive borrowing the EU undertook to support households and businesses during the Covid pandemic, chiefly through the NextGenerationEU recovery package and its Recovery and Resilience Facility.
What happens if governments don't agree on new revenue?
The auditors warn the EU budget could face a significant shortfall, forcing difficult choices: higher national contributions from member states, lower spending ambitions, or both.
How big is the recovery fund?
The Recovery and Resilience Facility provided €360 billion in grants and €213 billion in loans to EU member states, tied to pre-agreed reforms focused on digital and green transformation.
What fraud concerns have been raised?
The European Public Prosecutor's Office is investigating 512 potential fraud cases linked to RRF spending, and the auditors found that nine of 37 grant payments made in 2025 failed to meet stipulated rules yet were still paid.
