The European Union is facing growing financial pressure as borrowing increases and auditors raise concerns about how public money is managed. A new assessment warns that outstanding EU debt could reach €1 trillion by 2027, while irregularities in budget spending remain above acceptable levels.

The findings, released by the European Court of Auditors in October 2026, come as European leaders negotiate the bloc's next long-term budget. With competing demands for economic development, agriculture and international assistance, the report highlights the importance of stronger financial oversight.

Why EU Debt Is Rising

Outstanding EU borrowing increased by more than 20% in 2025, reaching approximately €738.9 billion. Much of this increase is connected to NextGenerationEU, the recovery programme introduced to support European economies following the COVID-19 pandemic.

The auditors estimate that total outstanding borrowing could approach €1 trillion by 2027 as existing financing commitments continue.

Repayments associated with the recovery programme are scheduled between 2028 and 2058, creating substantial financial obligations for future EU budgets.

Interest costs have also become a concern, with borrowing expenses exceeding earlier expectations.

Spending Errors Remain A Concern

The auditors estimated that 3.8% of EU budget expenditure in 2025, excluding the recovery fund, failed to comply with applicable funding rules.

This represents an increase from 3.6% in 2024 and remains above the auditors' 2% materiality threshold.

The highest estimated error rate appeared in cohesion spending, which supports regional development, employment and economic growth. It increased from 5.7% to 6.6%.

Agricultural and environmental programmes also recorded an increase, from 2.6% to 3.9%.

Importantly, spending errors do not automatically indicate fraud. They can include breaches of eligibility requirements, procurement procedures or other funding conditions.

Recovery Payments Face Scrutiny

The report also identified weaknesses in the Recovery and Resilience Facility, a central component of the EU's pandemic recovery programme.

Of 37 grant payments examined from 2025, nine failed to meet certain funding requirements.

Auditors additionally questioned changes to national recovery commitments, warning that insufficiently justified adjustments could allow governments to receive funding despite delivering less than originally agreed.

European Court of Auditors President Tony Murphy emphasised that ambitious financial plans require equally strong safeguards. He urged policymakers to apply lessons from existing recovery programmes when designing future spending arrangements.

Why The Commission Disagrees

The European Commission defended its financial controls, arguing that its assessment methods differ from those used by the auditors.

It reported approximately €9 billion in preventive and corrective measures during 2025 and maintained that the final estimated error rate for relevant programmes could fall below 2% after corrections.

The Commission also argued that its recovery-fund procedures reduce financial risks by linking payments to agreed milestones and targets.

Nevertheless, the auditors warned that weaknesses in monitoring and implementation could become more significant if similar arrangements are expanded.

What Happens To The Next Budget?

The debate is particularly important because the Commission has proposed a long-term EU budget approaching €2 trillion for 2028–2034.

Under the proposal, €24 billion would be allocated annually towards repayment of borrowing associated with recovery grants, with interest payments taking priority.

Auditors estimate that interest could account for approximately €93 billion over seven years, placing considerable pressure on available resources.

Member states remain divided over future spending. Germany, Austria, Denmark, Finland, the Netherlands and Sweden have called for reductions, while other countries favour maintaining stronger agricultural and regional support.

What This Means For Europe

Rising debt obligations could eventually require larger national contributions, additional EU revenue or reductions in planned expenditure.

These decisions may influence investment in infrastructure, regional development and other programmes supported by the European budget.

The auditors' findings underline the importance of transparent spending rules, reliable monitoring and realistic repayment planning.

As negotiations continue, European policymakers face a difficult challenge: financing shared priorities while ensuring that public resources are managed responsibly and future debt remains sustainable.