EU needs new revenue as debt piles pressure on budget

European Union debt levels are soaring, raising concerns about the bloc's future financial stability, auditors have warned. If governments cannot agree on additional revenue streams, the EU's next seven-year budget could be significantly affected, the European Court of Auditors (ECA) stated.

In the upcoming discussions, EU leaders will tackle the 2028-2034 budget following Ireland's proposal, which the "frugal" nations, including Germany, argue requires more cuts. The European Commission had proposed a budget of approximately two trillion euros last year, including plans for new taxes on large corporations, environmental taxation, and levies on tobacco.

However, the ECA's report highlights that the EU's debt has more than tripled in a short span, reaching €739 billion by the end of 2025. Pierre Moscovici, a member of the ECA, revealed that EU borrowing could potentially reach one trillion euros by 2027, primarily due to the COVID-19 recovery funds.

The auditors emphasize that the EU's interest payments could amount to up to €93 billion alone, given the mounting debt. They also warn that the European Commission's proposal might enable further borrowing for initiatives like supporting Ukraine or addressing major crises.

The ECA urges caution regarding future budgets: without an agreement on new revenue sources, the EU could face substantial shortfalls, potentially necessitating higher national contributions and reduced ambitions. The report points out that the EU would begin repaying its COVID-19 debt but the European Parliament demands debt rollover. EU lawmakers also advocate for new revenue through taxes on digital giants and online gambling.

EU parliamentarians will negotiate the budget with member states, who typically hold the final say. Brussels aims to secure a deal by Christmas before several significant European elections, notably the French presidential vote. However, Spain's decision to hold snap elections on November 29th makes the prospect even more challenging.