Questions of ethicality usually don't have a clear-cut answer, and this is no exception. Fundamentally, you should of course retain a say in what happens to the research that you produced as a grad student. On the other hand, it also seems completely fair and natural to include your work in reports to the funding agency that sponsored your work. Objecting against this may be an ethical violation in and of itself. Strictly speaking, and I am definitely not a lawyer, not reporting work that has been done in the context and using the money of an EU project may be a breach of the contract that your home institution has with the European Union (one would need to know the terms of the framework programme that the institution needs to sign when joining a project).
However, your main problem seems to be (from a comment):
EU Project deliverables are usually published and a citable piece of work and they are different from NSF progress report. If it was a progress report or a poster it was totally fine with me, but when a major part of the paper now is published in the report I cannot submit my manuscript to a venue anymore unless I make a major revision.
Based on my experience in 3 EU projects, this is, in the generality you describe, just not true. Deliverables per themselves can be public or confidential, which is described in your Description of Work. Even if they are public, that usually just means that they are uploaded to your project's website (and maybe some third-party project result aggregator, depending on what clusters and collaborations your project is part of). While these deliverables do get the occasional citation, they are not formally published and should really not preempt further publication, even in verbatim. I would see this in the same way as a preprint - for most journals, uploading a preprint to arXiv or PeerJ does not mean that you can't submit to a journal, so why would your text appearing in an un-reviewed project report?
It is also my practical experience that most scientific reports consist largely, or at least to a significant part, of copied papers, some of them published and some unpublished at the time of submission. Hence, your ex-advisor's behavior is at least completely in line with what other PIs do and expect in such projects.
That all being said, I have once worked in a project that, by default, published a book volume once a year with Springer which collected all reports of the project. This would indeed count as formal publication. However, even if this or a similar arrangement is the case for you, a compromise could be found that your work appears in the "official" report to the EU and is retracted from the resulting book publication.