EU debt more than triples and approaches a trillion euros - auditors

The debt obligations of the European Union are growing rapidly and could reach 1 trillion euros by the end of 2027. The European Court of Auditors warns that repaying borrowings will create a significant burden on future EU budgets and may force member states to increase contributions or reduce funding for individual programs.

This is stated in the EU's annual audit report for 2025, published on October 8.

According to auditors' calculations, at the end of 2025, the volume of outstanding EU borrowings reached 738.9 billion euros. A year earlier it was 601.3 billion euros. Thus, in just one year the debt increased by almost 138 billion euros, or about 23%.

For comparison, at the end of 2021, EU debt obligations amounted to 235.6 billion euros. In four years, their volume grew more than threefold.

This refers specifically to joint borrowings that the European Commission makes on financial markets on behalf of the European Union, not to the total public debt of all 27 member states.

The main reason for the increase in debt was the large-scale economic recovery program after the COVID-19 pandemic - NextGenerationEU. To finance it, the European Commission began issuing common European bonds, funds from which are directed to grants and loans to member states.

The updated program volume is about 638 billion euros. Of these, approximately 421 billion euros are allocated for non-repayable support, and the rest for lending. By the end of 2025, more than 452 billion euros had already been transferred to EU countries.

The problem is that funds raised on financial markets must be repaid. Repayment of the debt for NextGenerationEU is scheduled to begin in 2028 and end no later than 2058.

Auditors estimate that interest payments alone on the part of NextGenerationEU borrowings used for non-repayable assistance could amount to about 93 billion euros in 2028-2034.

The European Commission proposes to set aside annually in the new seven-year budget 24 billion euros for interest payments and repayment of the principal of this debt. At the same time, interest payments will take priority over early repayment of borrowed funds.

Auditors also note that borrowing costs for the EU are already about twice the initial estimates. Further dynamics will depend on market interest rates and inflation.

The President of the European Court of Auditors, Tony Murphy, in an interview with The Irish Times cautioned against perceiving common European borrowings as conditional or free money.

According to him, these are real debt obligations that will have to be repaid, in particular through contributions from member states. Constant refinancing of old debts with new loans does not eliminate the need for their repayment.

New EU financial programs create additional burden. In particular, the SAFE mechanism provides for raising up to 150 billion euros in credit funds for defense investments by European states.

The EU has also agreed on a credit program to support Ukraine of 90 billion euros in 2026-2027. It is financed through borrowings by the European Commission on international capital markets.

According to audit data, the total volume of already agreed or approved credits for Ukraine backed by EU budget guarantees, taking into account the new program, could reach 170.1 billion euros. By the end of 2025, 70.3 billion euros of this amount had actually been provided.

At the same time, this does not mean that all agreed credits have already been issued or that their entire volume will automatically become expenditures of the EU budget.

Auditors warn that new debt programs increase financial risks precisely at the moment when the EU is discussing its next seven-year budget for 2028-2034.

The European Commission proposed a budget of almost 2 trillion euros, which should ensure funding for defense, support for Ukraine, economic competitiveness, agriculture and other programs.

To cover these expenses, Brussels proposes to introduce additional sources of revenue. However, relevant decisions require agreement of member states, some of which already oppose increasing common spending.

The European Court of Auditors emphasizes: if new sources of income are not approved, the European Union will have to either demand larger contributions from national budgets or review planned expenditures.

At the same time, the auditors recommend that the European Commission develop a comprehensive debt management strategy for NextGenerationEU until 2058, taking into account risks of rate changes, refinancing and liquidity. Currently, such a long-term strategy has not been published.

Separately, the audit found an increase in the share of errors in EU budget expenditures. In 2025, their estimated level was 3.8% compared to 3.6% a year earlier. This refers primarily to violations of financing rules, procurement and expenditure verification, not necessarily fraud.

At the same time, the auditors confirmed the reliability of the EU's financial statements for 2025.

Based on materials: European Court of Auditors - audit of the EU budget for 2025, The Irish Times