(BSS/AFP) - Ballooning EU debt could blow a hole in the bloc`s next seven-year budget if governments fail to agree on new sources of revenue, auditors warned Thursday.

European Union capitals are locked in the usual battle between so-called "frugal" nations including Germany and higher-spending countries like France.

European leaders will discuss the 2028-2034 budget next week after Ireland, which holds the rotating EU presidency, presents the latest proposal Saturday that so-called "frugals" say must contain more cuts.

The EU executive proposed a budget worth around two-trillion-euros last year, including plans to raise money from new taxes on large companies, environmental taxation and levies on tobacco.

The European Court of Auditors (ECA) warned the EU economy is facing mounting pressure over the hundreds of billions of euros borrowed to support households and businesses during the covid pandemic.

The EU`s debt has "more than tripled in only a few years", reaching 739 billion euros by the end of 2025, Pierre Moscovici, a member of the European Court of Auditors, told reporters.

The auditors in the report warned: "The EU`s rising debt burden could weigh heavily on future budgets. EU borrowing could reach one trillion euros by 2027, largely due to" the covid recovery funds.

They said the EU would be spending up to 93 billion euros on interest payments alone because of the debt.

The ECA also pointed out the European Commission proposal would allow more new borrowing, for example to support Ukraine or in the event of a major crisis.

"The auditors therefore urge caution in respect of future budgets: without an agreement on new sources of revenue, the EU budget could face a significant shortfall, forcing difficult choices such as higher national contributions and lower ambitions," the Luxembourg-based body said.

Under the Commission proposal the EU would start paying back the covid debt but the European Parliament demands the debt be rolled over. EU lawmakers also want to raise new money through taxes on digital giants and online gambling.

The EU parliament will negotiate on the budget with member states, which usually have the final say over the budget.

Brussels wants leaders to strike a deal by Christmas before several critical elections in Europe, especially the French presidential vote.

EU officials knew that was always optimistic but it appears even more difficult after Spain announced snap elections on November 29.