EU debt could reach €1 trillion by 2027, while a growing share of European Union spending is failing to meet funding rules, according to the European Court of Auditors, adding pressure to negotiations over the bloc’s next long-term budget.
The EU’s independent financial watchdog said in its latest annual report that 3.8% of EU budget spending in 2025, excluding the pandemic-era recovery fund, contained errors that breached EU or national funding rules. The rate was higher than the 3.6% recorded in 2024 and remained well above the auditors’ 2% threshold for what they consider a material level of error.
The findings come as EU governments and institutions negotiate the bloc’s 2028-2034 Multiannual Financial Framework, or MFF. The European Commission has proposed a budget of almost €2 trillion, with a large share of funding to be distributed through national and regional plans based on a model used by the EU’s post-pandemic recovery programme.
The European Court of Auditors stressed that the 3.8% figure does not represent fraud. Auditors nevertheless reported 17 suspected cases of fraud to the relevant EU authorities. The EU’s accounts received another clean opinion, but the auditors issued an adverse opinion on the legality and regularity of EU budget spending for the seventh consecutive year, meaning that errors were considered material and widespread.
The highest error rate was recorded in cohesion spending, which supports jobs, economic growth and regional development. It rose from 5.7% in 2024 to 6.6% in 2025. Errors in spending related to agriculture and the environment also increased, from 2.6% to 3.9%.
The European Commission disputed part of the assessment. It estimated a 2.3% error rate for cohesion spending and argued that its own figures and those of the auditors are not directly comparable because the two institutions have different responsibilities and methods. The Commission also pointed to around €9 billion in preventive and corrective measures taken during the year and said the final error rate for cost-based programmes was estimated to be below 2% after corrections.
The Commission described the overall error rate as comparable with the previous year and significantly lower than the levels recorded in 2023 and 2022, when the auditors estimated errors at 5.6% and 4.2% respectively.
The auditors’ concerns extend beyond spending controls. EU borrowing has expanded sharply, with outstanding debt rising by more than 20% to €738.9 billion in 2025. Much of the increase is linked to NextGenerationEU, the recovery package created in response to the economic damage caused by the COVID-19 pandemic.
The debt accumulated through the programme must be repaid between 2028 and 2058. Under the Commission’s proposal for the next seven-year EU budget, €24 billion a year would be set aside for repaying the debt associated with NextGenerationEU grants, with interest payments taking priority.
The auditors warned that interest costs alone could reach about €93 billion over the seven-year period. That would account for more than half of the €168 billion allocated for debt repayment. They also noted that borrowing costs for NextGenerationEU remain roughly twice as high as originally estimated.
The European Court of Auditors further criticised the absence of a comprehensive repayment strategy covering the full period to 2058. Without a clear long-term plan, future EU budgets could face greater pressure as debt servicing costs compete with spending on other priorities.
The EU’s financial exposure is also growing through loans backed by the EU budget. These liabilities, which include loans provided to Ukraine, could reach as much as €664 billion by 2027. If borrowers fail to meet their repayment obligations, the Commission can require EU member states to provide additional funds.
The auditors’ concerns are particularly relevant because the Commission’s proposed 2028-2034 budget would rely heavily on an approach similar to the Recovery and Resilience Facility, the central spending instrument of NextGenerationEU. Under that system, governments receive money after meeting agreed milestones and targets rather than simply being reimbursed for eligible costs.
The auditors found problems with that system as well. Nine of the 37 recovery fund grant payments made in 2025 failed to meet stipulated rules or conditions. The problems included requirements relating to milestones and targets, public procurement and state aid.
Despite those findings, the payments were made.
The Commission defended the recovery fund model, arguing that it carries a low level of financial risk because payments are linked to checks on whether governments have met agreed milestones. It said it can withhold part or all of a payment when requirements have not been fulfilled.
The auditors also found that some governments had been permitted to change their commitments after the recovery programme was already under way. Of 32 changes examined, 29 lacked sufficient supporting evidence. In 13 of the 20 cases reviewed, milestones or targets were changed after a payment request had already been submitted.
The ECA warned that this could allow countries to receive EU money while delivering less than they originally promised.
More than €122 billion in recovery fund grants remained unpaid as the programme entered its final year. That represents more than one-third of the total grants available. France, Austria and Croatia were the only countries that had received at least 80% of their allocated grants at that point.
ECA President Tony Murphy said the experience should influence the design of the next EU budget. His warning was straightforward: a larger and more ambitious budget requires stronger safeguards to ensure that governments deliver what they have agreed to deliver.
The debate is also becoming a question of national finances. Additional borrowing proposed by the Commission could eventually increase pressure on member states to contribute more money to the EU budget, at a time when many governments are already trying to reduce deficits and manage high levels of public debt.
Murphy warned that planned borrowing could require member states to increase their national contributions to service EU debt. That prospect is particularly sensitive for countries that are already facing higher borrowing costs and pressure to control public spending.
The budget debate has exposed a clear divide among EU governments. Germany, Austria, Denmark, Finland, the Netherlands and Sweden, all net contributors to the EU budget, have called for several hundred billion euros to be removed from the Commission’s current proposal.
Other governments, including Spain and Italy, are pushing for a larger budget to protect agricultural and regional development funding. The disagreement reflects competing priorities over how much the EU should spend, where the money should go and how much additional debt member states are prepared to support.
Commission President Ursula von der Leyen has acknowledged the difficult fiscal position facing national governments but has warned against deep cuts to the proposed budget. She has argued that reducing spending too sharply could undermine priorities already agreed by EU governments.
Von der Leyen has also called for new sources of EU revenue, arguing that the bloc needs to address the income side of its budget as well as spending.
The dispute is unfolding against a tight political timetable. EU governments want to reach agreement on the next long-term budget during 2026, ahead of a series of politically sensitive national elections in 2027. The first round of France’s presidential election is scheduled for 18 April 2027, adding another layer of political uncertainty to the negotiations.
EU leaders are due to discuss how the next budget will be financed at a Brussels summit on 15 and 16 October.
The central issue is no longer simply how large the next EU budget should be. It is also whether the bloc can expand its financial commitments while keeping spending under control, managing the cost of its growing debt and ensuring that governments meet the conditions attached to EU funding.
The auditors’ report has therefore added another warning to an already difficult negotiation. Without additional revenue, they said, the EU could face a significant gap between the money needed to finance its ambitions and the resources available, leaving member states with the choice of contributing more or accepting a smaller programme of spending.
