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4. EU budget exposure to
Ukraine
The exposure of the EU budget from MFA and Euratom
loans and budgetary guarantees to Ukraine rose from
€16 billion at the end of 2022 to €34 billion at the end
of 2023. In 2023, €18 billion of MFA+ loans were
disbursed to Ukraine without the requirement for
provisioning to cover the risk of default. As Russia's
war of aggression may jeopardise repayment of
outstanding loans and trigger budgetary guarantees to
the Ukraine, any losses not covered by the provisioning
will have to be covered by future EU budgets or by the
budgetary 'headroom'. In February 2024 the European
Parliament and the Council agreed to set up the
Ukraine facility to provide up to €50 billion in both non-
repayable support (€17 billion) and loans (€33 billion).
The loans up to €33 billion will be financed by financial
market borrowing and also backed by the 'headroom'
of the EU budget.
EU BUDGET
5. EU spending schemes
CHALLENGES
The RRF and the new CAP model use a spending model
based on achievement of milestones and targets In its proposal for a revision of the MFF, the Commission
distinct from established cost-based models. Our work noted that 'The current availabilities in the EU budget are
on such models, particularly the RRF, has identified a no longer sufficient to address the most urgent
range of risks, including accountability gaps, which challenges that the EU is facing, let alone possible future
imply governance risks, as well as limitations in the needs in the coming years’
RRF monitoring framework, which is not sufficient for
measuring the RRF's overall performance. The ECA has pointed to various challenges related to the
EU budget in the recent past. This paper outlines the
- ECA Annual Report 2022, Chapter 11: Resilience and main challenges and refers to the underlying ECA work.
Recovery Facility. Audit in Brief 2022.
- Special report 21/2022: The Commission's
assessment of national recovery and resilience plans –
Overall appropriate but implementation risks remain. EU SPENDING
SCHEMES MEMBER
- Special Report 07/2023: Design of the Commission's Performance spending STATES’ NET
models have inherent CONTRIBUTIONS
control system for the RRF: Assurance and Net positions would change.
accountability gap remains at EU level in the new
risks (RRF, KAP)

- ECA Annual Report 2022, Chapter 2: Budgetary

delivery model, despite extensive work being planned. 5 1
Management. Audit in Brief 2022. - Special Report 26/2023: The Recovery and Resilience
Facility's performance monitoring framework: BUDGET EXPOSURE
EU BUDGET EU
- ECA Opinion 7/2022 concerning the proposal for a Measuring implementation progress but not sufficient CHALLENGES
TO UKRAINE FINANCING
Regulation of the European Parliament and of the to capture performance. 4 2 Even more
Council amending Regulation (EU, Euratom) 2018/1046 complicated due to
At end 2022 €15,6 billion,
as regards the establishment of a diversified funding by end 2023 €34 billion changes to own resources
strategy as a general borrowing method. budget system.
3
- ECA Opinion 3/2023 concerning the proposal for a EU DEBT
Regulation of the European Parliament and of the NGEU borrowing already leading
Council on establishing the Ukraine Facility. to high interest costs.
Financing enlargement with debt
12, rue Alcide De Gasperi L-1615 Luxembourg would increaseinterest costs further.
+352 4398-1 eca-info@eca.europa.eu eca.europa.eu
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1. Member states'
contributions to the EU
budget
Member states' contributions to the EU budget
could undergo significant shifts, particularly in
the context of changing expenditure needs and
enlargement. Some net recipients would become
net contributors. This will ultimately depend on
the overall own resources ceiling that is agreed.
Any significant strain on the EU budget could
result in high use of flexibilities and further
financial instruments outside the EU budget.
- ECA Briefing Paper 'Future of EU finances:
reforming how the EU budget operates'
(February 2018), in particular paras 7-8.
- Special Report 05/2023, 'The EU's financial
landscape. A patchwork construction requiring
further simplification and accountability', in
particular paras 1-20.
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2. EU financing
Changes to the own resources / budget system
could lead to EU financing becoming more
complex. Any new member states will need to
apply EU legislation on own resources, with
which existing member states sometimes have
problems. Delays in properly applying the system
may create financial risks for the EU. They would
also need to implement the European System of
Accounts (ESA2010) so that their GNI can be
accurately established. If their GNI is established
at too low a level, or if there are delays in fully
applying ESA2010, their contributions to the EU
budget and the overall ceiling for EU expenditure
will be correspondingly too low. It also implies
the risk that the budgetary 'headroom' to cover
financial instruments outside the EU budget will
be lower than it should be.
- ECA Briefing Paper 'Future of EU finances:
reforming how the EU budget operates' (February
2018), in particular paras 21-23.
- ECA Opinions on the system of own resources:
Opinions 4/2023, 3/2022, 2/2021 and 11/2020.
- ECA Annual Report 2022. Chapter 4: Revenue.
Audit in Brief 2022.
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3. EU debt
Borrowing on the markets in 2023 increased by
€110 billion euro to €458 billion euro, mostly due
to NGEU borrowing reaching €268 billion euro. The
Recovery and Resilience Facility (RRF) represents
the lion's share of the NGEU. With initially over
€700 billion euro of grants and loans available to
member states, €95 billion euro of loans on offer
went unused. The capital repayments of RRF debt
will commence in 2028. In the absence of a
dedicated EU funding source to repay the loans,
the funds required to do so would have to come
from the EU budget. However, the budget is
already under pressure and feeling the strain of
interest charges related to the borrowings, which
could increase to as much as €27 billion euro over
the MFF period, doubling initial estimates.
- ECA Annual Report 2022, Chapter 2: Budgetary
Management. Audit in Brief 2022.
- ECA Opinion 7/2022 concerning the proposal for
a Regulation of the European Parliament and of
the Council amending Regulation (EU, Euratom)
2018/1046 as regards the establishment of a
diversified funding strategy as a general
borrowing method.
- ECA Special report 16/2023 'NGEU debt
management at the Commission'.