The eight-person group’s visit will include meetings with Lugo, President Federico Franco, government ministers and court officials. The trip is scheduled to end Wednesday.
Earlier this month, European Parliament President Martin Schulz said representatives were very concerned about the situation in the South American country.
Observers this week will assess the situation and “draw the necessary consequences,” Shulz said.
The European Union is Paraguay’s fourth most important trading partner, after Brazil, Argentina and the United States, according to the European Commission. Officials have not specified whether sanctions could result from the trip.
Lugo went from Paraguay’s president to ousted leader in less than 48 hours after lawmakers impeached him last month.
Some Latin American presidents have called it a coup d’etat and refused to recognize the new president.
Several of Paraguay’s regional neighbors, including Chile, Venezuela, Brazil and Uruguay, pulled their ambassadors out of the country.
Venezuelan President Hugo Chavez also said his country would halt all shipments to Paraguay. And the Mercosur South American trade organization suspended Paraguay from its ranks.
The secretary general of the Organization of American States last week recommended against suspending Paraguay from the regional body.