EU Debt Could Reach €1 Trillion as Auditors Warn of Budgetary Risks
Brussels: The European Union is facing mounting debt pressures, with its outstanding liabilities potentially reaching €1 trillion by 2027, according to a warning from the European Court of Auditors (ECA). The increase is linked largely to borrowing under the Covid-19 recovery programme and continued financial support for Ukraine.
In its annual report on EU spending for 2025, the ECA also warned that changes to the structure of the bloc’s next seven-year budget could increase the risk of errors and create additional administrative burdens for member states.
The report cautions that EU debt will continue to rise unless new sources of revenue are identified to cover planned expenditure and future repayment obligations.
The warning comes as negotiations intensify over the EU’s next Multiannual Financial Framework (MFF), covering the period from 2028 to 2034. Ireland, which holds the rotating presidency of the Council of the European Union, is due to present a draft budget worth €1.9 trillion on Saturday.
Member states remain divided over the size and priorities of the next budget. Some countries are pushing for tighter spending and greater investment in competitiveness and defence, while others want to protect funding for agriculture, regional development and other established programmes.
EU debt continues to rise
According to the ECA report, the EU’s outstanding debt increased from €601.3 billion in 2024 to €738.9 billion in 2025.
A significant proportion of this debt is associated with borrowing undertaken to support Europe’s economic recovery following the Covid-19 pandemic.
Under the Recovery and Resilience Facility (RRF), the EU provided member states with €360 billion in grants and €213 billion in loans.
The report also notes that the European Public Prosecutor’s Office is investigating 512 suspected fraud cases involving the use of RRF funds.
The European Commission estimates that interest and principal repayments on EU borrowing could amount to approximately €24 billion annually during the next MFF period.
The European Parliament has argued that debt repayment costs should be deferred rather than included in the official budget figures. It is also seeking a 10 per cent increase in the overall budget.
Errors in EU spending increase
Although the ECA considers the EU’s 2025 accounts reliable, it reported an increase in the estimated error rate in expenditure, from 3.6 per cent in 2024 to 3.8 per cent in 2025.
The errors relate to spending that does not comply with applicable EU rules or the conditions established by member states and the European Parliament.
The court’s findings highlight continuing challenges in ensuring that EU funds are spent in accordance with the rules governing their allocation and use.
New revenue sources needed
The EU will need to identify additional sources of income to help meet its financial commitments, with proposals aimed at raising approximately €60 billion annually.
Potential revenue measures include increasing income from the EU emissions trading system, imposing charges on carbon-intensive imports, raising tobacco duties, introducing a levy on non-recyclable electronic waste and applying a corporate levy.
The proposed revenues would help finance the EU budget and support national and regional partnership programmes.
New budget structure raises questions
The next EU budget is expected to introduce changes to the way funding is distributed and managed under the Multiannual Financial Framework.
Under the proposed approach, instead of allocating fixed amounts directly to individual areas such as agriculture, rural development, research and Erasmus programmes, more funding would be channelled through national plans, giving member states greater discretion over how resources are distributed.
The ECA has warned that this model could create operational challenges for national administrations. Competition between government departments over the allocation of funds could also complicate the preparation of national budgets.
ECA President Tony Murphy stressed that ambitious budgets must be accompanied by equally robust safeguards to ensure proper oversight and accountability.
Ireland’s contribution to the EU
The report identifies Ireland as a net contributor to the EU budget.
In 2025, Ireland contributed approximately €3.4 billion and received €2.3 billion in funding, resulting in a net contribution of around €1.1 billion.
Ireland received €10.7 billion in Common Agricultural Policy (CAP) funding during the current 2021–2027 budget period. However, under the draft proposals for the next budget, the amount earmarked for Ireland would fall to €8.16 billion, representing a reduction of approximately 24 per cent.
The proposed reduction could have implications for agricultural and other EU-supported programmes in Ireland, depending on the final budget agreement.
Concerns over the Recovery and Resilience Facility
The ECA also raised concerns about the way the Recovery and Resilience Facility operates compared with traditional EU spending programmes.
Under the RRF, payments are generally linked to the achievement of agreed milestones and targets rather than reimbursement of actual costs. The court has also highlighted differences in how compliance with EU and national laws is addressed under the facility.
It warned that weaknesses identified in the implementation of the recovery programme could be repeated under the proposed budget system if adequate safeguards are not introduced.
The report further criticised instances in which the EU allowed member states to reduce or limit commitments under their recovery plans without what the court considered sufficient supporting justification or evidence.
Ireland was allocated €1.15 billion under the recovery facility, and a final payment request worth €225 million has been submitted.
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