Europe borrowed heavily to pull its economies out of the pandemic. Now the bill is arriving. The EU’s joint debt could hit €1tn by the end of 2027, and the interest already costs far more than Brussels planned, the European Court of Auditors warns.

Five years ago, the EU borrowed relatively little. In 2020, its joint debt stood at €93bn. By the end of 2025, it had grown almost eightfold to €739bn, up from €601bn just a year earlier. The figures come from the annual report of the European Court of Auditors (ECA), published on 8 October.

Most of that money went into NextGenerationEU, the recovery programme launched after the Covid-19 pandemic. To fund grants and cheap loans for member states, the European Commission borrowed on financial markets. Up to €421bn of the debt pays for grants that member states will never return. The EU budget itself has to repay that money by 2058.

Interest bill twice the plan

Back in 2020, the Commission’s forecasts assumed interest rates between 0.55 and 1.15 per cent. Reality turned out differently. After Russia invaded Ukraine and inflation surged, the EU’s cost of borrowing for NextGenerationEU rose above three per cent.

The difference shows in the numbers. Between 2021 and 2025, the EU paid €10.4bn to finance the grant part of the programme. The original estimate was €6.4bn, so the actual bill came in 62 per cent higher. For the whole current long-term budget, the auditors expect costs of €28.3bn, roughly double the planned €14.9bn.

The pressure will grow after 2027. In the next long-term budget, for 2028–2034, interest on the grant part alone could reach around €93bn. The Commission proposes to set aside €24bn every year to cover both interest and repayment. That is roughly one euro in every 12 the EU plans to spend.

Fresh uncertainty comes from the Middle East. The conflict that began in late February 2026 has clouded the outlook for inflation and monetary policy. The Commission has not yet published updated estimates of what this could mean for its funding costs.

Defence and Ukraine add to the pile

Defence is the next big item. SAFE, a new EU instrument, allows the Commission to borrow up to €150bn and lend it to member states for arms and equipment. No money had flowed by the end of 2025, but half of the loans should reach member states in 2026 and 2027.

Support for Ukraine pushes the figure higher still. Since 2014, the EU has promised Kyiv loans worth up to €170bn, yet only €70bn had arrived by the end of 2025. Much of the rest will come from a €90bn loan to cover Ukraine’s budget and defence needs in 2026 and 2027. The EU raises that money on the markets, while Kyiv has to pay it back only once Russia pays war reparations. Not every member state shares the risk, as Czechia, Hungary, and Slovakia stayed out.

The next budget could add much more. The Commission wants room to borrow another €150bn for member states’ own investment plans and up to €100bn more for Ukraine. In a severe crisis, it could tap a further €395bn. If all of that were used, the EU would take on almost as much new debt as it owes today.

Shortfall looms without new revenue

The proposed €2tn budget for 2028–2034 also rests on money the EU does not have yet. About a fifth of it depends on new own resources, revenue streams flowing straight into the EU budget that member states still have to approve. If they fail to agree, the EU would have to raise national contributions, scale back its ambitions, borrow more, or roll over existing debt. In plain terms, national taxpayers would pay more, or farmers, regions, and researchers would get less.

ECA President Tony Murphy put it bluntly to the European Parliament’s Committee on Budgetary Control on 8 October. “Overall, the message is one of caution: unless these new revenue streams are approved and materialise as expected, the EU budget could face a significant shortfall,” he said. In his view, substantial new borrowing could also expose member states to fresh obligations at a time when their own budgets are already under strain.

How the money is spent worries the auditors too. The estimated error rate in EU spending rose to 3.8 per cent, up from 3.6 per cent in 2024 and above the two per cent threshold the ECA considers material. Nine of the 37 grant payments from the Recovery and Resilience Facility (RRF) did not comply with the rules. That matters, because the Commission wants to model the next budget largely on the RRF.

It’s real debts, which have to be paid back.
— Tony Murphy, President of the European Court of Auditors

The Commission pushes back. At its midday briefing on 8 October, spokesperson Maciej Berestecki said the auditors found problems in only 16 of 1,038 milestones and targets, and insisted that all RRF payments made in 2025 were “legal and regular”. His colleague Balazs Ujvari added that, by the Commission’s own estimate, errors in cost-based programmes stay below two per cent once all corrections are made. For Mr Murphy, however, the lesson applies to debt as much as to spending. “It’s real debts, which have to be paid back,” he told The Irish Times.