Brussels – The European Union is going into debt. The policy of borrowing to finance common priorities—primarily the post-pandemic recovery but also defense through the SAFE program—is putting pressure on the accounts and forcing the Twenty-Seven to start thinking in terms of multi-year budgets focused on loan repayments. The EU Court of Auditors provides warnings and recommendations in its annual report for 2024. 

In a nutshell, loans can “increase the risks to future EU budgets,” the Luxembourg auditors note. Data at hand, over the past five years, the Commission has “significantly increased” bond issuance to finance large-scale programs such as SURE (for employment support) and NextGenerationEU (NGEU, the post-pandemic recovery program financed by the Recovery Fund). The result: by 2027, EU borrowing could exceed 900 billion euros, nearly 10 times the 2020 level before the post-pandemic recovery program.

Then comes the question of interest. Here, the report of the Court of Auditors continues, total expenditure for NextGenerationEU in the current budgetary period could exceed EUR 30 billion, “more than double the initial forecast by the European Commission (EUR 14.9 billion).” While for the 2028-2034 budget cycle, interest expenditure could reach almost EUR 74 billion. For this reason, to safeguard the sustainability of future EU budgets, “there will be a need to consider increasing burden from borrowing-related obligations”, the auditors emphasize, calling for “robust guarantees and the need to ensure sufficient resources for the implementation of EU programs.”

The European Court of Auditors in Luxembourg [photo: European Court of Auditors]EU budget under pressure

 The accounting and financial situation is not the best. The EU budget exposure resulting from this borrowing stood at EUR 342 billion as of the end of 2024, representing a 14.8 percent increase from EUR 298 billion at the end of 2023. The situation will not improve. On the contrary, in Luxembourg, they expect the EU budget exposure will increase further to reach EUR 567 billion by 2027. The accounts are a mess, then. The rejection of the Stability Pact reform by the European Court of Auditors itself does not appear to be helpful in this context.

Repayments until 2058, for the EU, debt is now structural

Loans generate debts that burden the future of the EU. Repayment of the loans taken out for the NextGenerationEU post-pandemic recovery program “may start before the end of 2027, if
unused appropriations remain available in the budget line to cover NGEU financing.” Otherwise, “repayment must start in 2028 and be completed by 2058 at the
latest.” The bulk of the repayments is therefore deferred to future multi-year budgets because, the report continues, the repayment schedule must be “steady and predictable” and annual repayments of the
NGEU borrowing are capped at 7.5 percent of the maximum amount of non-repayable NGEU
support (EUR 31.6 billion per year). 

Additionally, there are uncertainties related to the loans granted to Ukraine so far, which reached EUR 13.1 billion by the end of 2024. The EU and its member states are also exposed to Kyiv’s ability to repay the guaranteed financial support. In the scenario in which Ukraine does not pay the interest on these loans, this would create “an additional burden on the EU budget of about EUR 1.65 billion per year, or EUR 11.5 billion in total between 2028 and 2034” for the EU.

English version by the Translation Service of Withub