| Dokumendiregister | Riigikogu |
| Viit | 1-2/26-387/1 |
| Registreeritud | 05.06.2026 |
| Sünkroonitud | 05.06.2026 |
| Liik | EL dokument |
| Funktsioon | |
| Sari | |
| Toimik | KOMISJONI TEATIS - COM(2026) 200 |
| Juurdepääsupiirang | Avalik |
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| Saabumis/saatmisviis | |
| Vastutaja | |
| Originaal | Ava uues aknas |
EN EN
EUROPEAN COMMISSION
Brussels, 3.6.2026
COM(2026) 200 final
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE
EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF
THE REGIONS AND THE EUROPEAN INVESTMENT BANK
2026 European Semester - Spring Package
1
1. INTRODUCTION
At a time of major geopolitical shifts and tensions, the EU needs to continue strengthening
its competitiveness and strategic autonomy to sustain its economic and social resilience and
cohesion. The economic environment is marked by profound geopolitical uncertainty and
intensifying global competition, persistent global tensions, heightened security risks, and
increasingly severe climate change impacts. In addition, persistent energy price volatility and
rising global tariffs continue to elevate the cost of living, strain supply chains and increase
operational costs, affecting in particular small and medium-sized enterprises (SMEs). These
developments expose several weaknesses and compound Europe’s long-standing challenges
linked to subdued productivity growth and innovation. However, the EU has also shown resilience
by navigating multiple crises. It is implementing an ambitious competitiveness agenda and is
making progress on digital innovation, decarbonisation goals, and economic security.
The 2026 European Semester Spring Package aims to build on the EU’s strengths through
coordinated action to boost competitiveness, secure strategic autonomy, increase resilience,
and strengthen preparedness while maintaining fiscal sustainability. The Competitiveness
Compass (1) remains the guiding framework for this European Semester cycle. It builds on the vast
potential of the single market, fosters macroeconomic and fiscal stability and aligns structural
reforms and investments with the EU’s strategic priorities of closing the innovation gap,
decarbonising our economy, reducing strategic dependencies, promoting skills and quality jobs,
ensuring social fairness and cohesion, and simplifying the business environment. These are also
some of the core ambitions of the “One Europe, One Market” roadmap, the swift implementation
of which remains crucial. The EU is pursuing these objectives while upholding its commitment to
implementing the European Pillar of Social Rights and the UN Sustainable Development Goals.
The 2026 European Semester provides a comprehensive framework to align national and
regional reforms and investments with EU priorities. Building on the progress achieved
through the Recovery and Resilience Facility (RRF), which has boosted reform and investment
implementation, and the mid-term review of cohesion policy, the 2026 European Semester will
continue to provide a key analytical basis to identify and prioritise reform and investment needs
across a broad range of policy areas including measures to address economic, social and territorial
disparities. Taking into account this analysis, the EU, Member States and other stakeholders need
to coordinate investments and reforms to improve the EU’s economic security and strengthen
strategic EU-wide value chains within shared competitiveness priorities. In this Spring Package,
the Commission places a strong emphasis on assessing the progress made in implementing the
comprehensive set of 2025 country-specific recommendations (CSRs). Coherence and synergies
between the European Semester and other governance frameworks, such as the Digital Decade and
the CAP recommendations, will be ensured.
1A Competitiveness Compass for the EU, COM(2025) 30 final.
2
The Commission calls on the European Council to endorse and on the Council of the EU to
adopt the Commission recommendations for the 2026 CSRs. It also calls on all Member States
to implement the CSRs fully and in a timely manner, in close dialogue with their social partners,
civil society organisations and other stakeholders.
2. KEY POLICY CHALLENGES AND RECOMMENDATIONS
Responding to emerging threats
Addressing the energy crisis
Fossil fuels are at the core of the current energy crisis, which highlights the urgent need for
a decisive European response to ensure clean, homegrown and affordable energy, and
security of energy supply, and to safeguard EU industrial competitiveness. The energy
transition remains the most effective strategy for achieving Europe’s strategic autonomy,
strengthening resilience, structurally lowering energy prices, and delivering the clean, abundant
and homegrown energy needed to power the economy of the future.REPowerEU, which was
launched in May 2022 to respond to Russia’s full-scale invasion of Ukraine has already
demonstrated that joint action can effectively reduce energy demand and imports, stabilise energy
markets, strengthen resilience and boost electrification. Thanks to energy investments supported
by several EU funds, the EU is significantly better placed than before to withstand energy market
volatility. In particular, the Connecting Europe Facility helped finance critical cross-border energy
infrastructure, thereby strengthening interconnections and supporting the development of an
integrated and sustainable European energy market, and a genuine Energy Union.
Through the Accelerate EU initiative (2 ), the Commission has proposed a coordinated
approach to bring immediate relief to vulnerable households and companies facing energy
price spikes, and to make the energy system more resilient. To ensure security of supply,
greater EU coordination, including for the refilling of gas storage facilities for the winter and the
collective release of oil reserves is essential. It will be equally important to ensure the availability
of critical fuels, such as jet fuel and diesel, and avoid disruptions to cross-border transport and the
single market. At the same time, Member States need to ensure that emergency measures taken to
reduce the economic and social impact of the energy crisis on households and businesses are
temporary, targeted, timely, proportionate, and fiscally sustainable, and that they do not increase
the demand for fossil fuels. With the Middle East crisis Temporary State aid Framework (3), the
Commission adopted targeted and temporary rules to facilitate support for the most exposed
sectors of the economy. Finally, the EU needs to speed up the energy transition to continue
reducing its reliance on fossil fuels – the only way to ensure our true energy independence. The
EU, Member States, industry and all other relevant stakeholders must continue their joint efforts
2 AccelerateEU, COM(2026) 370 final. 3 Communication from the Commission – Middle East Crisis Temporary State Aid Framework, OJ C, C/2026/2593, 5.5.2026;
ELI: http://data.europa.eu/eli/C/2026/2593/oj.
3
to improve energy infrastructure across Europe, including by advancing the Energy Highways set
out in the European Grids Package. The upcoming electrification action plan will set an ambitious
electrification target and measures to address barriers in the industrial, transport, and building
sectors. The Commission will also present a legislative proposal on network charges and taxation,
ensuring that electricity is taxed less than natural gas, among other things. The Commission will
coordinate an EU exercise (AccelerateEU investment chapter) to assist Member States to make
maximum use of and reallocate available EU funding, e.g. cohesion policy funds, where feasible
and in line with Member States’ and regions’ preferences. In parallel, the Circular Economy Act
will support industries in replacing virgin fossil materials with circular and bio-based ones. These
efforts should go hand in hand with accelerated and full implementation of the REPowerEU plan
and energy-related CSRs to provide clean and affordable energy, circular solutions, enhance
energy security, and strengthen resilience to external price shocks. It should also be in line with
other initiatives, such as RESourceEU, that prevent the weaponisation of the EU’s excessive
dependencies on raw materials.
Bolstering economic security
Economic security remains a pressing priority for the EU amid persistent geopolitical
tensions, supply chain vulnerabilities, and strategic dependencies. Member States continue to
face risks stemming from strategic dependencies, particularly in energy, critical raw materials,
fertilisers and key technologies, which expose economies to price volatility, risks to food security,
disruptions, and external pressure. While progress has been made in diversifying energy sources,
reducing dependence on single suppliers, and accelerating the clean and digital transitions,
challenges persist. Energy-intensive industries remain vulnerable to high energy prices, and delays
in renewable deployment, grid resilience, and storage investments hinder long-term energy
security. Critical raw material dependencies, often concentrated in non-EU suppliers, threaten
strategic sectors essential for the digital and clean transitions, underscoring the need for circular
economy advancements, domestic production, and supply chain diversification. To strengthen
economic security, Member States must deepen Single Market integration, fast-track strategic
investments in clean technologies manufacturing capacity, technological sovereignty and
cybersecurity, infrastructure resilience, and crisis preparedness. The proposed Industrial
Accelerator Act aims to promote Europe’s economic security by strengthening industrial capacities
in key sectors while keeping on track with the transition to decarbonised manufacturing.
Enhancing the EU’s defence readiness
Member States continue to strengthen their defence readiness and capabilities as called for
in the 2025 CSRs. Member States have made progress in strengthening their defence readiness
and capabilities, in particular thanks to the additional fiscal space of up to 1.5% of GDP in 2025-
2028 linked to the activation of the national escape clause in 17 Member States. These efforts
should be sustained, including through investments to ramp up and modernise production capacity
to meet the demand surge. Joint procurement initiatives, which offer demand visibility to industry,
4
reduce market fragmentation and can lower unit costs, must be continued. Progress on these fronts
is necessary and in line with the Commission’s European Defence Readiness 2030 objectives. To
this end, the Security Action for Europe (SAFE) initiative is providing up to EUR 150 billion in
competitively priced, long-maturity loans to Member States requesting financial assistance for the
procurement of defence capabilities. The Commission has already endorsed 18 out of the 19
national defence investment plans submitted by Member States to request SAFE loans, to provide
EUR 130 billion of financial support. Additionally, cohesion policy has redirected
EUR 11.9 billion towards defence and dual-use investment under the medium-term review.
Looking ahead, there is a critical need for sustained, long-term investment in civil preparedness,
including to enhance national cybersecurity and space assets, which is a strategic enabler of
defence readiness. This need is underscored by developments in the eastern regions bordering
Russia, Belarus, and Ukraine.
Ensuring macroeconomic stability
Member States need to sustain medium-term fiscal sustainability against a background of
competing needs for public finances. Member States face growing demands on public spending
driven by the urgent need to bolster defence spending and boost competitiveness, while also
confronting the long-term fiscal costs of demographic change (4) and the rising costs of climate
change impacts, in a context of already high public debt. In parallel, the EU’s external environment
has become more uncertain, which compounds the challenges for the economies and the policy
making of the Member States and the EU. As part of the European Semester, the Commission has
assessed Member States’ compliance with the requirements stemming from the European
economic governance framework, which is built around Member States’ medium-term fiscal
structural plans (see Box 1).
Measures that strengthen the structural resilience of the European energy system and
accelerate the transition away from fossil fuels may benefit from the existing flexibility within
the fiscal framework. In order to preserve Europe’s long-term energy security and mitigate the
economic implications associated with the conflict in the Middle East, Member States will be faced
with substantial fiscal costs in the short run. Upon request by the Member States, the scope of the
current National Escape Clause for defence spending could be broadened to accommodate the
measures undertaken since February 2026 to reduce the dependence on imported fossil fuels and
thereby contribute to Europe’s security and defence. Measures which could be considered would
include support for households and firms to reduce their dependency on fossil fuels and promote
decarbonisation, measures that accelerate electrification of end use sectors, investments in
electricity grids, storage of electricity (e.g. batteries), energy saving and capacity expansion of
clean energy sources.
4 Communication from the Commission to the European Parliament, the Council, the European Economic and Social
Committee and the Committee of the Regions “Demographic change in Europe: a toolbox for action”.
5
Fiscal sustainability safeguards would remain fully in place. The existing cap on the flexibility,
of up to 1.5% of GDP in additional expenditure, under the National Escape Clause for defence
would remain unchanged. Therefore, while the scope of the flexibility may be broadened the risk
to fiscal sustainability would remain contained. Within the existing cap (1.5% of GDP), a dedicated
annual cap of 0.3% of GDP would apply specifically to the energy support measures and be
available for 2026-2028 (5), with a cumulative cap of 0.6% of GDP over that same period. These
limits are consistent with the purpose of addressing unavoidable short-term fiscal costs and ensure
a balance between the flexibility provided for energy-related supports and those available for
defence expenditure. The expenditure exceeding the cap would remain subject to the standard
compliance assessments under the fiscal framework. Member States should continue to use the
period until 2028 to make the necessary budgetary adjustments to accommodate the higher level
of defence spending in the future.
Member States will have the opportunity to request the expansion in the scope of their
existing National Escape Clause over the coming months. Member States that have not yet
requested the activation of the National Escape Clause for defence may do so at any time. The
Commission will assess all requests received to ensure that the extension or activation of the clause
does not endanger fiscal sustainability over the medium term. The Commission will provide in due
time further clarity to Member States around the procedural and operational requirements,
including the reporting by Member States of sufficiently granular data and information to monitor
and assess eligibility of the proposed measures in support of strengthening the structural resilience
of the European energy system and accelerating the transition away from fossil fuels, and conduct
fiscal surveillance.
Over the past year, macro-financial vulnerabilities have evolved diversely across Member
States, having narrowed in some cases, while uncertainty has augmented very recently. Some
Member States face particular challenges to their macroeconomic stability, which in some cases
have cross-border relevance, thereby are a concern for the euro area and the EU as a whole. Under
the macroeconomic imbalance procedure, the Commission has identified macroeconomic
imbalances or excessive imbalances in four Member States(see Box 2 and Appendix 4).
Box 1: Fiscal surveillance under the Stability and Growth Pact
In spring 2026, the Commission’s assessment of Member States’ compliance with the
relevant Council recommendations covers both 2025 and 2026. The assessment for 2026,
based on the Commission Spring 2026 Forecast, will be followed up by a further assessment in
autumn, and another assessment will take place in spring 2027 based on outturn data for 2026.
The core of the Commission’s assessment consists in comparing outturn data and the
5 To ensure equal treatment, Member States that might have already fully used the flexibility under the NEC to increase
defence expenditure could receive temporary and limited additional flexibility under the same conditions, including
the condition that overall fiscal sustainability risks remain contained.
6
Commission’s projections for net expenditure (6) growth with the maximum growth rates of net
expenditure as recommended by the Council (see Appendix 5 and the Fiscal Statistical Tables
(7). For Member States for which the national escape clause for defence spending (8) has been
activated (9), the assessment of compliance takes this flexibility into account (10).
For the ten Member States currently under excessive deficit procedure (EDP)(11), the
Commission assessed the action taken in response to the Council recommendations under
the EDP. For Malta, the Commission is today recommending to the Council to close the
excessive deficit procedure, as the general government deficit was successfully reduced to below
3% of GDP in 2025 – in advance of the deadline that the Council established – and is projected
to remain below 3% of GDP in 2026 and 2027. At the same time, the Commission notes that,
for Malta, the net expenditure growth is above the ceilings recommended by the Council in both
2025 and 2026, with the corresponding deviations in cumulative terms being above 0.6% of
GDP. For the nine other Member States under EDP (Belgium, France, Hungary, Italy,
Austria, Poland, Romania, Slovakia and Finland), and after accounting for the flexibility
from the national escape clause where relevant, the Commission considers that effective action
has been taken at this stage and that the procedure should be kept in abeyance. For Italy, the net
expenditure growth in 2025 was above the recommended ceilings. However, in cumulative
terms, the net expenditure growth over 2024-2025 was only marginally above the recommended
ceilings, and Italy is projected to correct the excessive deficit in 2026, in line with the deadline
set by the Council (12). At the same time, the Commission assesses France to be at risk of non-
compliance with the recommended annual growth rate of net expenditure in 2026 by a small
margin, while it is projected to be compliant with the cumulative growth rate. Hungary is
assessed to be at risk of material non-compliance in 2026.Therefore, on current projections, an
overall assessment of action taken may be needed at a later stage. In case these assessments
would point to a lack of effective action, this could then require a stepping-up of the EDP (13).
6 Net expenditure as defined in Article 2, point (2), of Regulation (EU) 2024/1263: ‘net expenditure’ means
government expenditure net of (i) interest expenditure; (ii) discretionary revenue measures; (iii) expenditure on
programmes of the Union fully matched by revenue from Union funds; (iv) national expenditure on co-financing of
programmes funded by the Union; (v) cyclical elements of unemployment benefit expenditure; and (vi) one-offs and
other temporary measures. 7 Fiscal Statistical Tables providing background data relevant for the assessment of the budgetary policies of the
Member States, SWD(2026) 200 final, Brussels 3.6.2026. 8 The national escape clause for higher defence spending provides limited and temporary flexibility, up to 1.5% of
GDP compared to a reference year, over the period 2025 to 2028. 9 To date, the Council has activated the national escape clause for defence spending for 17 Member States (Belgium,
Bulgaria, Czechia, Denmark, Germany, Estonia, Greece, Croatia, Latvia, Lithuania, Hungary, Austria, Poland,
Portugal, Slovenia, Slovakia, Finland). For Spain, on 22 May 2026 the Commission has adopted recommendation to
the Council to activate the national escape clause for defence, which is now pending adoption by the Council. 10 For those Member States, the assessment focusses on the comparison in cumulative terms, and checks whether any
positive deviation from the recommended ceilings is explained by a corresponding increase in defence expenditure.
The flexibility provided for by the national escape clause for defence is the only flexibility taken into account in the
Commission’s assessment in spring 2026. 11 Belgium, France, Italy, Hungary, Malta, Austria, Poland, Romania, Slovakia and Finland. 12 Based on data provided by Eurostat, Italy’s general government deficit decreased from 3.4% of GDP in 2024 to
3.1% of GDP in 2025. Based on policy measures known by the cut-off date of the forecast, the Commission Spring
2026 Forecast projects a deficit of 2.9% of GDP in both 2026 and 2027. 13 At the current juncture, there is no outturn data for 2026 and a stepping-up of the procedure could be considered at
a later stage if the comparison between net expenditure growth projected in the Commission forecast and the
7
Also, the Commission stresses that the fiscal situation in Romania remains fragile with the
largest 2025 deficit ratio in the Union and where there are serious implementation risks which
require a strong and persistent focus on fiscal adjustment in 2026 and subsequent years.
For the Member States not currently in EDP, the Commission assessed progress with the
implementation of the medium-term plans and compliance with the relevant Council
recommendations. Among these, in 2025, and after accounting for the flexibility from the
national escape clause where relevant:
• Czechia, Denmark, Germany, Estonia, Greece, Spain, Latvia and Sweden are
assessed as compliant, as the net expenditure growth is below the maxima recommended
by the Council or the cumulated deviation is within the flexibility provided by the
national escape clause.
• Ireland, Cyprus and Portugal are deemed to be compliant with the budgetary policy
obligations of the Stability and Growth Pact thanks to their budgetary position in
surplus, thus contributing to a reduction in their government debt-to-GDP ratios. At the
same time, the Commission notes that Portugal exceeds the recommended maximum
growth of net expenditure, while Cyprus and Ireland materially exceed the recommended
maximum growth of net expenditure.
• Lithuania and Slovenia are assessed as non-compliant since the net expenditure growth
is above the ceilings recommended by the Council, but the corresponding deviations
remain below the 0.6% of GDP (in cumulative terms) threshold. However, the
Commission notes that for Lithuania the general government deficit and public debt are
projected below the 3% and 60% of GDP reference values.
• Luxembourg, the Netherlands, Bulgaria and Croatia are assessed as materially non-
compliant with the recommended net expenditure ceilings, with the corresponding
deviations above the 0.3% of GDP (in annual terms) and/or 0.6% of GDP (in cumulative
terms) thresholds. At the same time, the Commission notes that for Luxembourg and the
Netherlands the government deficit and public debt are below the 3% and 60% of GDP
reference values in 2025.
In 2026, again after accounting for the flexibility from the national escape clause where relevant:
• Czechia, Denmark, Estonia, Germany, Ireland, Greece, Latvia are projected to be
compliant, as the net expenditure growth is below the maxima recommended by the
Council or the cumulated deviation is within the flexibility provided by the national
escape clause.
• As in 2025, Cyprus and Portugal are projected to be compliant with the budgetary
policy obligations of the Stability and Growth Pact thanks to their budgetary position
projected to stay in surplus or close to balance in 2026. At the same time, the
Commission notes that Portugal risks to exceed the recommended maximum growth of
net expenditure and Cyprus is at risk of materially exceeding the recommended
maximum growth of net expenditure.
recommended corrective net expenditure path (taking the flexibility for defence spending under the national escape
clause into consideration as appropriate) pointed to a particularly serious case of non-compliance.
8
• Spain, Luxembourg and the Netherlands are found at risk of non-compliance.
However, for Luxembourg and the Netherlands the Commission notes that the general
government deficit and public debt are projected below 3% of GDP and 60% of GDP
respectively in 2026.
• Lithuania and Slovenia, and, as in 2025, Bulgaria and Croatia, are assessed at risk of
material non-compliance in 2026. At the same time, the Commission notes that, for
Lithuania and Croatia, the general government deficit and public debt are projected
below the 3% and 60% of GDP reference values. Finally, for Slovenia, a confirmation
of the material non-compliance based on outturn data for 2026 could trigger a report
under Article 126(3) TFEU for the assessment of compliance with the debt criterion.
• Sweden is assessed at risk of material non-compliance with the recommended
annual growth rate of net expenditure in 2026, while it is projected to be compliant
with the cumulative growth rate. At the same time, the Commission notes that for
Sweden the general government deficit and public debt are projected below the 3% and
60% of GDP reference values.
In the assessment of implementation of the medium-term plans, the Commission also
considered the set of investments and reforms underpinning an extension of the respective
fiscal adjustment periods. This concerns eight Member States ( 14 ), for which the fiscal
adjustment period in these plans had been extended from four to seven years. For these Member
States, the Commission has assessed the implementation of the key steps of those reforms and
investments, taking into account the information provided in the Annual Progress Reports. In
the light of its assessment, the Commission considers that, overall, all the concerned Member
States have complied with their commitments in terms of reforms and investments in a
satisfactory manner (see Appendix 5).
Finally, the Commission has assessed compliance with the deficit criterion for five Member
States (15), to decide whether there is case to recommend to the Council new decisions on
the existence of an excessive deficit. The assessment leads to the conclusion that at this stage
there is no case to open an excessive deficit procedure for Germany, Estonia and Slovenia. For
Latvia, overall, the deficit criterion is assessed as fulfilled. Instead, for Bulgaria, taking into
account the Opinion of the Economic and Financial Committee on its report, the Commission
will consider proposing to open an excessive deficit procedure.
Given the recent developments in the energy markets since the outbreak of the war in the
Middle East in February 2026, many Member States have adopted fiscal policy measures
to mitigate the social and economic impact of high energy prices on households and
businesses. The Commission Spring 2026 Forecast incorporates the budgetary cost of such new
measures of EUR 14.5 bn (0.07% of the EU GDP) in 2026 for the EU as a whole. This estimate
assumes that the measures will come to an end in accordance with the expiring dates stated in
14 Belgium, Germany, Spain, France, Italy, Austria, Romania and Finland. 15 Report from the Commission, prepared in accordance with Article 126(3) of the Treaty on the Functioning of the
European Union, 3.6.2026, COM(2026) 302 final. Among the Member States currently not in EDP, at end of 2025
the general government gross debt ratio exceeded the reference value in Germany, Greece, Spain, Portugal and
Slovenia. For these Member States, the debt ratio is assessed as sufficiently diminishing and approaching the reference
value at a satisfactory pace. Therefore, there were no Member States for which compliance with the debt criterion had
to be further examined in the report under Article 126(3) TFEU.
9
the respective laws at the cut-off date of the forecast. If these measures were to be extended until
end-2026, their fiscal cost would increase to EUR 38.6 bn (0.2% of the EU GDP) in 2026.
Three-quarters of the support is being spent in a non-targeted manner, with the remaining quarter
being targeted at vulnerable households or energy-intensive firms. Moreover, more than two-
thirds of the estimated budgetary cost corresponds to measures that aim at directly impacting
the marginal cost of energy consumption, such as cuts to excise duties. The remaining one-third
corresponds to measures that provide temporary income support to households or (non-price)
compensations to firms.
Box 2: Macroeconomic imbalances in the Member States
The Commission has assessed the existence of macroeconomic imbalances for the seven
Member States selected for in-depth reviews in the 2026 Alert Mechanism Report. All
those Member States had been identified with imbalances or excessive imbalances in the
previous cycle of surveillance under the macroeconomic imbalance procedure (MIP). Like in
the past two MIP annual cycles, the 2026 in-depth reviews were presented to the Member States
before the publication of the Spring Package to enable more in-depth multilateral discussions in
the Council Committees before the country-specific recommendations were formulated (16).
The classification of imbalances is based on three criteria: (i) the gravity of imbalances;
(ii) their evolution and prospects; and (iii) policy responses. These criteria are considered
within the forward-looking orientation of the MIP applied since the economic governance
review concluded in 2024. Specifically, under the forward-looking approach, those three criteria
remain in place, but more emphasis is placed on the evolution and prospects of imbalances and
the policy responses by the national authorities to overcome those imbalances or the risks they
present.
Over the past year, vulnerabilities have evolved diversely across Member States but have
narrowed in several cases, while uncertainty has augmented recently. Inflation fell further
in most of the euro area and the EU, though at different speeds, current accounts improved, and
high debts declined in various cases, while the banking sectors have remained healthy. On the
contrary, house prices accelerated in several countries. Nonetheless, this annual cycle of MIP
implementation ends against a backdrop of higher uncertainty, as the conflict in the Middle East
has raised concerns about energy prices, higher and more volatile inflation, tighter financing
conditions, and slower economic growth. Predicting how risks will evolve and how they will
affect the macroeconomic stability of the EU, the euro area, and of the individual Member States,
has become more challenging.
The Commission took several decisions under the MIP. Vulnerabilities are receding in a few
of the Member States subject to an in-depth review and in some cases leading to a finding of no
imbalances under the MIP. Relevant challenges remain in the other Member States for which an
in-depth review was undertaken. In particular:
• Greece is assessed as no longer experiencing imbalances. Vulnerabilities related to
government and external debt have receded over recent years, supported by steady GDP
16 SWD (2026) 137 to 143. The seven in-depth reviews were shared with Member States through the Council’s Economic Policy
Committee and its LIME working group in two batches, one in mid-April (for the Netherlands, Romania, Sweden), another one in
early-May (for Greece, Hungary, Italy, Slovakia). They are also published as European Economy Institutional Papers.
10
growth, with budgetary surpluses further contributing to decreases in government debt;
banks’ non-performing loans have declined and balance sheets have improved; the current
account deficit remains sizeable but its favourable financing mitigates external
sustainability risks; Greece has implemented relevant reforms to reduce its long-standing
vulnerabilities.
• The Netherlands is assessed as no longer experiencing imbalances. Vulnerabilities related
to high levels of household debt, the housing market, and the large current account surplus
have been present over the years but have lessened recently.
• Sweden is assessed as no longer experiencing imbalances. Vulnerabilities related to its
real estate market and high levels of private debt remain but their gravity has lessened
recently.
• Italy continues to experience imbalances as vulnerabilities related to high government debt
and weak productivity growth, which have cross-border relevance, persist, and continued
and effective implementation of growth-enhancing reforms and investments, together with
a prudent fiscal stance, remains crucial to reduce those vulnerabilities.
• Hungary continues to experience imbalances as vulnerabilities related to competitiveness,
government financing needs, and house prices persist, and policies have continued
compounding those vulnerabilities.
• Slovakia continues to experience imbalances as vulnerabilities related to the external and
government balances, competitiveness, the housing market, and household debt persist,
with policy action remaining limited.
• Romania continues to experience excessive imbalances; vulnerabilities related to fiscal
and current account deficits have diminished somewhat recently but remain very
significant, while cost competitiveness continues deteriorating albeit less than before. The
Commission will continue monitoring the progress of relevant policy action to overcome
those excessive imbalances.
Appendix 4 details the country-specific aspects for the seven Member States concerned.
Against this backdrop, and in light of the persistently high debt ratios in a number of
Member States, enhancing the quality of public finances and the efficiency of spending is
critical to delivering real value for taxpayers and ensuring fiscal sustainability. This requires
a strong prioritisation of spending and making it more efficient and effective, including through
spending reviews. In parallel, modernising and streamlining taxation systems can help generate
the necessary revenues while fostering economic resilience.To support credible and growth-
friendly fiscal policies, several countries have reformed their overall fiscal governance. Some
countries have strengthened independent fiscal institutions, made public finance reporting more
transparent and improved the management of public investments. The 2026 CSRs call on Member
States to enhance the quality of public spending by making health care and long-term care systems
more sustainable and by stepping up the use of spending reviews for example in Poland, Slovenia,
and Spain. This is particularly relevant in Member States where public revenue as a share of GDP
11
is already high. Some Member States are also recommended to improve the sustainability of their
pension systems. For instance, Austria, Germany, Italy, Luxembourg and Poland are
recommended to apply measures that encourage a higher effective retirement age. Meanwhile,
Cyprus, Czechia, Lithuania, Malta, and Portugal – as well as Austria, Germany, and Luxembourg
– should support retirement income by strengthening their supplementary pension schemes, which
also supply long-term capital to their economies.
A number of Member States have taken action to strengthen tax compliance and modernise
revenue collection. Among the Member States that had received a CSR related to taxation policy
in 2025, examples of positive developments include enhanced digitalisation of tax administrations
– such as Greece’s digital tax reporting system and related e-invoicing reforms and Portugal’s steps
to improve compliance by streamlining and digitalising tax procedures. Several Member States are
making efforts towards broadening their tax bases and rebalancing their tax mix. Additionally,
some efforts to combat tax evasion and avoidance have progressed. By comparison, less progress
has been made on the long-standing need to tackle aggressive tax planning and the significant
challenges posed by tax gaps. European governments forego more than EUR 100 billion in
revenue every year due to tax non-compliance. Furthermore, there are several thousand tax
expenditure provisions, which can be costly and do not always have a good rationale. Such
complexity in taxation hinders fair and efficient revenue mobilisation. The proposed 2026 CSRs
call for reducing these gaps to safeguard tax fairness and revenue sustainability, while further
improving the tax mix to support sustainable competitiveness. For instance, Ireland, Poland,
Bulgaria and Estonia are recommended to broaden tax bases, including by tapping into revenue
from tax sources less detrimental to growth. Continued modernisation and digitalisation of tax
administrations can help achieve these objectives.
Strengthening the EU’s competitiveness
Channelling savings towards productive investments to boost competitiveness
In 2025-2026, Member States made modest progress in improving access to finance, and
disparities persist across Member States. Positive developments include robust banking and
insurance sectors and continued financial stability. However, challenges endure, including
persistent financing gaps, especially for scaleups, but in some Member States also start-ups and
SMEs; inefficient insolvency frameworks in several Member States; and still under-developed and
fragmented capital markets that fail to sufficiently complement debt finance provided by banks.
With the proposed 2026 CSRs, the Commission calls for national measures to build the
Savings and Investments Union (17). The Commission calls on several Member States to expand
their financing sources by incentivising institutional and retail investor participation in capital
markets, notably equity markets. In many Member States, supplementary pension funds have the
potential to both improve individuals’ living standards in old age and channel long-term savings
17 Savings and Investments Union, COM(2025) 124 final.
12
into productive investment, thereby helping to improve access to finance and strengthen Member
States’ competitiveness.
At EU level, several initiatives launched under the Savings and Investments Union strategy
also aim to improve the flow of savings into investment. The Recommendation on increasing
the availability of savings and investment accounts with simplified and advantageous tax
treatment (18) and the Communication on a financial literacy strategy for the EU (19) map out a
clear strategy to promote greater retail investor participation in capital markets. The
Communication on enhancing the capacity of the EU supplementary pension sector to improve
retirement income and supply long-term capital to the EU economy (20) aims to mobilising
Europe’s pension funds’ assets to expand financing options for all firms. Lastly, the market
integration and supervision package (21) adopted in December 2025 seeks to create a more
integrated, efficient and competitive capital market giving people better options for growing their
wealth and helping businesses access funding.
Closing the innovation gap
Some Member States took steps to boost research and innovation, as called for by the 2025
CSRs. However, progress remains limited and uneven across EU Member States and regions. With
R&D spending stagnating at 2.2% of GDP in 2024, the EU lags behind global leaders in R&D
intensity such as the US (3.4% of GDP), Japan (3.4%) or South Korea (5.0%) and, since 2020, it
has been overtaken by China (2.6%). Still, positive developments were recorded in improving
financing conditions for start-ups and scale-ups, for example in Austria, and Greece. Progress was
also made in facilitating technology transfer and providing incentives for innovation and research
in Czechia and Germany. Regarding scientific excellence, Ireland took measures to strengthen
public R&D funding, although sustained increases are needed, while Estonia enhanced public
support for applied research.
As significant shortfalls persist, the 2026 CSRs prioritise closing Europe’s innovation gap
and boosting R&D investment. They highlight the need to: foster public and private R&D
investment; strengthen innovation systems by improving business-academia cooperation, the
efficiency of public support to business innovation and access to finance; and enhance access to
innovation, including, where relevant, in regions lagging behind. Czechia, Spain, France and
Poland are advised to deepen knowledge transfer, support innovation uptake, and provide an
innovation-friendly environment for startups and scaleups. Among innovation frontrunners,
Denmark is encouraged to further strengthen SME innovation, technology diffusion, and access to
growth financing. In addition to fostering the digitalisation of businesses, shortages in some
science, technology, engineering and mathematics (STEM) fields and of information and
18 Commission Recommendation 2025/2029. 19 COM(2025) 681 final. 20 COM(2025) 839 final. 21 Further development of capital market integration and supervision within the Union, COM(2025) 940 final.
13
communications technology specialists in strategic technological domains should be further
addressed, including by incentivising female enrolment in these disciplines.
EU-level initiatives aim to further support efforts to close the innovation gap. These initiatives
include the Startup and Scaleup Strategy (22), including the launch of a EUR 5 billion Scaleup
Europe Fund, and the envisaged European Research Area Act, which aims to strengthen (23) the
free circulation of knowledge, researchers and technology, as well as the upcoming European
Innovation Act, which aims to boost deployment and commercialisation of innovation (24). As part
of the next MFF, the proposed European Competitiveness Fund will mobilise private capital at
scale. Through a close connection with Horizon Europe, it will support investment at all stages
from research and innovation, through scale up and industrial deployment, to manufacturing.
Member States should accelerate the uptake of artificial intelligence and other cutting-edge
technologies such as quantum, cloud, high-performance computing, in line with the Apply AI (25)
and the AI Continent Action Plan (26). Together with the deployment of AI Factories and AI
Gigafactories, the forthcoming Chips Act 2 and the Cloud and AI Development Act, will mobilise
critical computing, data and infrastructure capacity and talent to secure Europe’s leadership in
artificial intelligence and frontier technologies. Finally, Important Projects of Common European
Interest (IPCEIs) are a powerful State aid instrument for cross-border projects driving innovation
and fostering European competitiveness.
Delivering simple and digital public services
Modest progress has been made in reducing administrative burdens and modernising public
administration. Some positive developments include streamlined permitting procedures and
improved regulatory impact assessments. Digitalisation and modernisation of public services,
including justice systems, has advanced in several Member States, while progress has stalled in
others, for example due to project delays (e.g. in Cyprus). Reforms of public administration were
also undertaken in several Member States, for instance Greece’s civil service digital upskilling
programmes.
Therefore, the proposed 2026 CSRs call on Member States to increase administrative
efficiency, reduce administrative burdens, and foster digital public services. Belgium, Croatia
and Spain, for example, are called upon to speed up the issuing of construction, environmental and
business permits. Addressing overlapping competencies, pursuing regulatory simplification at
national, regional and local level and improving coordination across those levels would reduce
administrative burdens on people, businesses and administration, thereby fostering
competitiveness and innovation. Digitalising public administration requires not only improving
the provision and interoperability of digital public services, e.g. in Germany and Bulgaria and
22 The EU Startup and Scaleup Strategy, COM(2025) 270 final. 23 European Research Area (ERA) Act. 24 European Innovation Act. 25 Apply AI Strategy | Shaping Europe’s digital future. 26 The AI Continent Action Plan | Shaping Europe’s digital future
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guarantee equal digital access to the justice system and other public services across regions and
investing in the digital skills of civil servants. To increase civil service capacity, there is also a
need to improve governance and coordination including at local level, for example Croatia. The
quality of law-making can be improved by strengthening impact assessments, ensuring stakeholder
consultations and reducing the use of emergency ordinances, for example in Romania.
At EU level, the Commission has set out measures to ensure that new EU initiatives avoid
regulatory complexity and fragmentation. The ‘simplicity by design’ principles outlined in its
Communication on a simpler, clearer and better enforced EU rulebook ( 27 ) are particularly
noteworthy. At the same time, the Commission continues to tackle duplications and
inconsistencies in the existing body of legislation, including through the Action Plan on Regulatory
Deep Cleaning. This dual-track approach, together with the underlying principles and measures,
also provides useful guidance for equally ambitious action at national, regional, and local level. In
2025, the Commission tabled ten omnibus and other proposals, bringing administrative cost
savings of EUR 15 billion annually and approximately EUR 6 billion in one-off cost savings.
Additionally, the proposal for an EU Inc. corporate legal framework which would provide
businesses with a unified set of rules across the EU calls on Member States to prioritise the
digitalisation and cross-border availability of key business procedures under the single digital
gateway (28).
Making the most of the single market
There has been some progress in reducing single market barriers and strengthening
institutional quality, though progress remains limited and uneven across Member States.
Progress in reducing single market barriers and ensuring effective competition remains limited;
some measures have been taken to strengthen sectoral regulation, reduce entry barriers and
improve coordination, for example in Italy and Spain. Late payments are distorting the Single
Market, hampering SMEs’ growth and eroding supply chains’ competitiveness by reducing access
to finance, and stifling innovation. Cyprus has made some advancement in improving the
governance of state-owned enterprises by adopting an action plan aligned with international
recommendations. In public procurement, despite several implemented measures, a number of,
Member States e.g. Poland and Bulgaria, continue to face challenges related to limited competition
and efficiency of procedures,in particular for smaller tenders where bidder participation remains
low. Some measures have been taken to improve the efficiency of the justice system, as part of the
recovery and resilience plans, for example in Italy, Spain and Greece, through organisational
reforms, improved digital capabilities and training.
Deepening the single market, including by reducing gold-plating of EU legislation, is a top
priority for the EU, and the European Semester has a role to play. This year’s CSR proposals
include more references to country-specific barriers to the single market, complementing existing
single market enforcement and monitoring instruments. The aim is to identify, based on available
27 A Simpler, Clearer and Better Enforced EU Rulebook, COM(2026) 380 final. 28 Regulation (EU) No 1024/2012.
15
evidence, concrete, country-specific obstacles with a cross-border dimension that affect market
entry, the free movement of goods and services, and the overall business environment. The
Commission will further deepen its analysis of single market barriers and gold-plating that increase
the regulatory burden and compliance costs for businesses and hamper intra-EU business
dynamics (29).
The 2026 CSRs are geared to lifting restrictions to the single market, strengthening the rule
of law, and ensuring an effective institutional framework. Regulatory restrictions on certain
professions and on services markets continue to create barriers to the cross-border provision of
services, for example in Luxembourg and Austria. Measures are also called for to simplify
regulatory frameworks, reduce gold-plating, and lower administrative burdens affecting market
entry and cross-border activity. Further action on regulatory simplification and reducing
compliance costs is called for in Bulgaria, Spain, Croatia, Slovakia, Austria, Germany, and Cyprus
among others. Ensuring a predictable and fair regulatory framework, strengthening anti-corruption
measures and fostering a dynamic and innovative business environment are key priorities for
Hungary, Bulgaria and Slovakia. In parallel, several Member States including Croatia, Cyprus,
Malta and Italy, are recommended to improve the effectiveness of justice systems, notably by
reducing case backlog and shortening the length of court proceedings.
The EU is taking action to further strengthen the single market. Examples include the One
Europe, One Market roadmap, which sets specific targets for legislative proposals, for example
the upcoming European Product Act to modernise product rules while ensuring stronger
compliance across borders. The forthcoming Fair Labour Mobility Package will include the Skills
Portability Initiative and a European Social Security Pass and will strengthen the European Labour
Authority to better enforce the rules. Further examples include the proposal for an EU Inc.
corporate legal framework, covering the entire lifecycle of a company, and the Digital Networks
Act, designed to modernise and harmonise telecommunications rules and strengthen Europe’s
digital resilience. The ongoing reform of the EU public procurement directives further simplifies
the legal framework for public procurement. Completing the trans-European transport network
(TEN-T) and its European Transport Corridors is essential to ensure the free movement of people
and goods within the single market, foster the EU's industrial competitiveness and enhance military
mobility.
Accelerating an affordable clean energy transition and decarbonisation
On decarbonisation, energy, environment and climate adaptation, progress has been uneven
but, in some cases, notable progress has been made in aligning with EU objectives. Positive
developments include accelerated renewable energy deployment, such as Ireland’s offshore wind
auctions and Lithuania’s solar capacity expansion. Heating decarbonisation has progressed; for
example, subsidies for installing fossil fuel boilers have been ended across the EU. The Dutch
29 Communication of the Commission on A Simpler, Clearer and Better Enforced EU Rulebook, 28 April 2026.
16
Energy Act enables more flexible grid use in the Netherlands, while sustainable agriculture
initiatives have begun addressing greenhouse gas emissions, pollution, biodiversity loss and
ecosystem degradation. In transport, electrification and alternative fuels are gaining traction, with
support for electric transport and Germany’s rail infrastructure investments. Positive steps on water
and resource management were taken, including Spain’s adoption of drought resilience plans,
Greece’s implementation of the water service providers’ reform, and Portugal’s adoption of a
circular economy action plan.
The 2026 CSRs aim to accelerate the clean energy transition to make energy more affordable,
enhance security, support competitiveness, and align with the 2030 climate and energy
targets. Member States in which fossil fuels still represent a significant part of the electricity
generation mix, for instance, Czechia, Bulgaria and Hungary, need to scale up clean energy,
particularly wind. For these and other Member States there is a need to accelerate and streamline
grid permitting procedures and to upgrade grid infrastructure including cross-border connections
and supporting the transition of regions highly dependent on fossil fuels. Several Member States
including Croatia, Malta and Portugal are encouraged to prioritise energy efficiency and phase out
fossil fuel subsidies that neither tackle energy poverty in a targeted way nor address genuine energy
security concerns, that hinder electrification and that are not crucial for industrial competitiveness.
Several Member States such as Germany, France, Spain, Portugal, Ireland, Cyprus and Latvia need
to invest in energy system flexibility, grid capacity, and energy storage. Rolling out smart meters
is an important prerequisite to fostering demand side flexibility and should be prioritised in several
countries, for example Croatia and Germany. Several Member States, including Slovakia, Greece
and Poland would benefit fromreducing the relatively high taxation of electricity compared with
fossil fuels, in order to incentivise electrification effectively, while France is encouraged to
accelerate electrification in high-emitting sectors. Support should be provided to regions that are
facing industrial transition challenges, including in Austria and Poland.
Transport decarbonisation requires electrification, including the roll-out of recharging
infrastructure, and a modal shift, in particular by strengthening public and rail transport. In
particular, coordinated action between the EU, Member States and industry is encouraged to
accelerate the deployment of truck charging infrastructure at locations along the two heavily used
TEN-T corridors of the North Sea-Baltic and Scandinavian-Mediterranean. Member States also
need to encourage and support the decarbonisation of manufacturing, in particular in energy-
intensive sectors. For example, Germany and Croatia are asked to improve permitting related to
clean industry facilities. Poland needs to decarbonise transport, Bulgaria is encouraged to promote
the roll-out of clean transport, and Romania is asked to increase public transport connectivity of
remote and rural areas.
Regarding water resilience and resource management, Member States including the Netherlands,
and Malta are called upon to improve water quality and prevent excessive water use. France is
encouraged to strengthen water management to address competing demands between water-
intensive sectors and safeguard water quality. Others, including Spain, Lithuania, Greece, and
17
Denmark are recommended to strengthen waste management and promote a circular economy.
Several Member States including Spain, Slovenia, Slovakia, and Cyprus are advised to implement
their climate adaptation measures, including nature-based solutions and strengthened governance
systems. It is recommended that Spain improve the management of its forests, while Portugal,
Malta and Romania need to increase the resilience of their infrastructure. In addition, social equity
must be addressed by taking further measures to tackle energy poverty and support vulnerable
households, for example in Slovakia and Bulgaria. Romania and Italy are encouraged to accelerate
investments in environmental infrastructure, in particular in the less developed regions.
Major EU initiatives strengthen climate resilience and support the energy transition to
preserve the competitiveness of the European economy across sectors. As part of the European
Grids Package (30), the Commission is addressing the most urgent energy infrastructure needs,
including interconnectors, via the Energy Highways initiative. The forthcoming European
Integrated Framework for Climate Resilience should support the ability of Member States to tackle
the growing impacts of climate change and strengthen the preparedness and risk management. The
Communication on Integrated Wildfire Risk Management (31) specifically focuses on wildfire
prevention, preparedness, responses and recovery. The Circular Economy Act, in line with the EU
Bioeconomy Strategy (32), will support industries in replacing virgin fossil materials with circular
and bio-based ones. Supporting the fisheries and aquaculture sectors through the Energy Transition
Partnership will be key to enhancing the sector‘s resilience. Building on the EU Strategy on Small
Modular Reactors (SMRs), interested Member States are encouraged to contribute to creating the
enabling conditions for SMRs development in the EU and facilitate deployment in the early 2030s.
Promoting skills, education and quality jobs
There has been some improvement in the functioning of labour markets and boosting human
capital development, but further action is needed to strengthen Europe’s competitiveness
and productivity. Progress has been made, for instance, in improving employment opportunities
by strengthening active labour market policies (ALMP) in some Member States. In Croatia, the
Job+ Programme supports labour market integration of groups in situations of vulnerability, and
Slovenia has adopted an effective framework for active employment policy measures. Incentives
to work have been strengthened by changes to the tax and benefit framework. For example, in
Belgium, the duration of unemployment benefits has been limited to two years for most jobseekers,
while strengthening ALMP and providing support to vulnerable groups. Vocational education and
training (VET) programmes have been expanded, for instance in Bulgaria and Spain. Initiatives to
boost STEM education and adult learning were launched, such as Finland’s digital continuous
learning initiatives for adults. Access to early childhood education and care services has been
improved in several Member States, also with the support of EU funds.
30 European Grids Package, COM(2025) 1005 final. 31 Communication on integrated wildfire risk management, COM(2026) 330 final. 32 Communication on A Strategic Framework for a Competitive and Sustainable EU Bioeconomy COM (2025) 960 final.
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The 2026 CSRs call on Member States to promote quality employment, improve the
functioning of labour markets and foster skills development, including the development of
digital skills, through quality education and training, with a view to increasing productivity
and fostering a resilient social market economy. Improving educational outcomes and better
aligning people’s skills with labour market needs remain key priorities, also to address labour and
skills shortages which are particularly acute in strategic sectors such as cybersecurity, quantum,
artificial intelligence and semiconductors. For several Member States, it is key to boost skills levels,
for instance, by strengthening basic skills and tackling early school leaving (Spain), promoting
enrolment in STEM and improving the labour market relevance of training (France), and
expanding upskilling and reskilling opportunities for low-skilled and older adults (Estonia and
Latvia). Some Member States are called to improve their VET systems or leverage skills
intelligence tools to future-proof their education and training systems. Several Member States, for
example Greece, Sweden, Lithuania, Romania, Croatia and Slovenia, are encouraged to tackle
labour shortages, including by strengthening ALMP; supporting the labour market integration of
underrepresented groups, such as persons with disabilities, younger and older people, people with
a migrant background and Roma; or, where relevant, by better attracting and retaining talent from
outside the EU. Addressing labour market segmentation remains important in Poland and the
Netherlands. Expanding the provision of quality early childhood education and care, for example
across all regions in Austria, remains important to foster equal opportunities for children and
women’s participation in the labour market. The participation of older workers needs to be
enhanced for instance in Luxembourg and Germany, with a view to increasing the effective
retirement age. Social dialogue and collective bargaining, as recommended for instance to
Hungary and Italy remain key tools for addressing labour market challenges and fostering
economic and social resilience.
Various key initiatives at EU level aim to support Member States in fostering quality jobs
and skills development. The Quality Jobs Roadmap (33) and the forthcoming Quality Jobs Act
guide Member States in ensuring that quality employment can act as an enabler for a competitive
social market economy. As announced in the Union of Skills (34), the Commission will present a
European VET Strategy in 2026 to help VET systems respond to changing market needs. The
STEM Education Strategic Plan (35) reinforces this ambition by supporting participation in STEM
studies, especially among girls and women. The Council recommendation on human capital in the
EU ( 36 ) calls on Member States to strengthen basic skills as a solid foundation for skills
development, prioritise STEM at all levels of education, boost public and private investment and
make better use of skills intelligence, with a view to tackling skills shortages. Building also on the
Action Plan on Basic Skills37, the forthcoming Education Package will help struggling learners
improve basic skills, support schools and teachers, and boost cross-border school cooperation.
33 Quality Jobs Roadmap, COM(2025) 944 final. 34 Union of Skills, COM(2025) 90 final. 35 STEM Education Strategic Plan, COM(2025) 89 final. 36 Council Recommendation 6081/1/26. 37Action Plan on Basic Skills, COM(2025) 88 final.
19
Through the Digital Europe Programme (38), the EU is significantly investing in building advanced
digital skills in all Member States.
Social fairness
The implementation of the 2025 CSRs shows some progress in areas such as pensions and
healthcare, among others. Social protection and inclusion policies have progressed in several
areas, including the extension of coverage to all workers and self-employed people, pension
reforms to improve adequacy and sustainability, healthcare digitalisation, and investment in long-
term care. Adjustmentsto the minimum wage in Slovenia have improved income fairness, while
pension system changes in Belgium have strengthened sustainability and those in Croatia have
improved its adequacy, though further progress is often still needed.
The 2026 CSRs call on Member States to address existing and emerging challenges in the
area of social fairness, including as identified through the Social Convergence Framework
(see box 3). In several Member States, boosting social inclusion and reducing poverty requires
strongerpathways to the labour market as well as better outreach, targeting and adequacy of
minimum income schemes, including for older people. Improving access to social services is
equally essential, both to support those experiencing poverty and to prevent others from falling
into it. These services also play a key role in guiding people towards education, training, healthcare,
and other essential services, including energy. Several Member States, including Spain, Romania
and Greece, need to improve the effectiveness of social protection, for instance by revisiting its
coverage. Improving access to and affordability of healthcare and long-term care remains a priority
in, for example, Czechia, Estonia and Romania and in depopulating and rural regions of some
Member States. Addressing persistent access and affordability challenges while maintaining cost-
effectiveness and fiscal sustainability requires tackling workforce shortages and addressing
territorial disparities in several Member States, such as Spain and Portugal.
EU initiatives have established a comprehensive framework to improve social fairness,
support poverty reduction, and strengthen social inclusion across the EU. With the EU Anti-
Poverty Strategy (39), the Commission supports eradication of poverty in the EU by 2050 through
a comprehensive approach.The strategy is complemented by measures to strengthen the European
Child Guarantee (40) to break the cycle of child poverty. Through robust equality and non-
discrimination policies, the EU promotes social fairness and leaves no one behind, in line with the
Union of Equality Strategies (41).
38 Conclusions on European Competitiveness in the Digital Decade - Council Conclusions (5 December 2025). Adopted alongside
this Spring Package, the 2026 State of the Digital Decade report provides a comprehensive picture of the EU’s digitalisation,
identifies the structural gaps to be closed by 2030 and sets out horizontal and country-specific recommendations to guide reforms
and investments over the next programming period. 39 SWD(2026) 770 final. 40 SWD(2026) 772 final. 41 See European Commission, Union of Equality strategies: gender equality strategies (2020–2025 and 2026–2030), LGBTIQ+
equality strategies (2020–2025 and 2026–2030), EU anti-racism action plan 2020–2025, EU anti-racism strategy 2026-2030, EU
Roma strategic framework 2020–2030 and strategy for the rights of persons with disabilities 2021–2030.
20
Increasing the affordability of housing
To tackle the ongoing crisis in housing affordability, ambitious reforms at the appropriate
levels of government are crucial for increasing housing supply, streamlining administrative
procedures, and tackling capacity constraints in residential construction. There has been
progress in implementing the 2025 CSRs on housing, but it remains limited. Positive developments
include increasing housing construction in several Member States and tackling capacity constraints.
Some Member States have expanded in particular the supply of social and affordable housing, with
initiatives including Denmark’s comprehensive housing package, and Ireland’s plans to expand
social housing supply. However, significant challenges persist across Member States, including
the need to simplify and speed up planning and permitting procedures, severe housing shortages
particularly in urban areas and touristic regions, rising homelessness and declining affordability,
constraints on labour and educational mobility, and increasing inequalities.
Recognising the scale of the challenge and seeking to boost access to affordable, sustainable
and quality housing, including social housing, the Commission is proposing several
additional CSRs. Easing housing supply constraints requires reforms in many Member States to
simplify rules and procedures for example to facilitate and accelerate permitting, for instance in
the Netherlands and Germany. Action is also needed to bring public land into use, boost the
construction and renovation of affordable, energy-efficient and sustainable homes, and strengthen
coordination across various levels of governance, for instance in Poland. Improving affordability
also requires making taxation frameworks more effective, for example in Sweden, as well as
repurposing underutilised stock, for instance in Portugal. Social housing needs should be addressed
through adequate investments, for instance in Spain and Lithuania. Without decisive action,
housing shortages and inequalities will further undermine economic competitiveness and social
cohesion, in particular in regions and cities most acutely affected.
Coordinated EU-level action, with full regard for the subsidiarity principle, can play a
supporting role in addressing the housing crisis. The European Affordable Housing Plan (42),
adopted in December 2025, and related initiatives such as the European Strategy for Housing
Construction (43), the New European Bauhaus (44), the revision of State aid rules on housing and
the proposal for a Council Recommendation on fighting housing exclusion ( 45 ), provide a
framework for joint action. Additional initiatives and measures, including the forthcoming
Affordable Housing Act, a simplification package on housing in 2027, and a pan-European
investment platform involving major financial institutions, aim to scale up investment and address
market challenges such as the mismatch between housing supply and demand. Member States are
encouraged to implement ambitious and comprehensive reforms to enhance housing affordability,
including by facilitating construction and renovation, making full use of the data-sharing, mutual-
42 European Affordable Housing Plan, COM(2025) 1025 final. 43 The European Strategy for Housing Construction, COM(2025) 911 final. 44 New European Bauhaus, COM(2025) 1026 final. 45 Proposal for a Council Recommendation on fighting housing exclusion, COM(2026) 540 final.
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learning and technical assistance opportunities available at EU level, including within the
European Housing Alliance. At least EUR 43 billion is mobilised under the current Multiannual
Financial Framework, to support affordable and sustainable housing efforts with an additional
EUR 3.3 billion in cohesion policy resources re-programmed towards this objective as part of the
mid-term review, complemented also by support from the Social Climate Fund notably for
vulnerable households and small businesses. Under the Strategy for Housing Construction (46), the
EU, Member States and industry are encouraged to continue working hand in hand to identify and
implement key investment and reform measures needed to scale-up the EU-wide offsite housing
construction industry.
Economic, social and territorial cohesion
The implementation of the 2025 CSRs on cohesion shows partial progress in reducing
territorial disparities and strengthening regional and local administration governance. Sub-
national governance reforms have advanced in some Member States, improving service delivery,
while local public services have been strengthened, also through further digitalisation. However,
persistent challenges, such as the still unequal access to infrastructures and services, further deepen
economic and social disparities across regions and between urban and rural areas. Insufficient
administrative capacity, insufficient coordination across administrative levels and slow digital
uptake in local governments further hinder efficient delivery of public services, which undermines
economic, social and territorial cohesion.
The 2026 CSRs focus on regional competitiveness, strengthening sub-national governance,
and ensuring access to key services. Sub-national governance in certain Member States would
benefit from better coordination across levels of government and from advancing the digitalisation
of public administration at local level. For instance, stronger coordination between central and
local administrations would be warranted in areas such as climate resilience and housing to ensure
effective implementation of policy actions for example in Poland, Spain and Czechia. Reducing
the urban-rural divide also demands better access to public services, for example in Ireland and
Lithuania, as well as improved connectivity of remote regions (e.g. Bulgaria). Finally, in the area
of innovation it is particularly important to take into account regional specificities (Croatia, the
Netherlands, Poland, Romania).
The EU is taking action to tackle key challenges specific to certain territories to ensure the
right to stay. The EU Agenda for Cities (47) is strengthening multilevel governance through more
regular dialogues with local authorities to better integrate their needs into EU policymaking, while
the Vision for Agriculture and Food (48) focuses on improving the living standards in rural areas.
Estonia, Latvia, Lithuania, Poland and Finland are recommended to address the unique socio-
economic, security and civil preparedness challenges faced by the regions on the EU’s external
46 The European Strategy for Housing Construction, COM(2025) 911 final. 47 An EU Agenda for Cities, COM(2025) 739 final. 48 A vision for Agriculture and Food, COM(2025) 75 final.
22
eastern border, in line with the Commission’s recently adopted Strategy for Eastern border regions
(49). The specific challenges and pressures affecting livelihoods and the socio-economic fabric in
outermost regions, as well as islands and coastal areas will be further addressed in dedicated
strategies and supported by the European Ocean Pact (50). The upcoming EU Sustainable Tourism
Strategy will focus on tackling unbalanced tourism, promoting sustainable practices and
strengthening the sector’s global competitiveness, encouraging action at national and sub-national
level. Finally, the Commission will also put forward a strategy to ensure that all Europeans have
the right to stay in their home region, focusing on the key challenges underlying the growing
demographic decline of some European regions.
Box 3: Analysis of upward social convergence in line with the Social Convergence
Framework
The Commission has assessed the existence of challenges to upward social convergence in
nine Member States in line with the Social Convergence Framework (SCF), which entails a
two-stage country-specific analysis of risks and challenges to upward social convergence (51).
In the first-stage analysis, presented in the 2026 Joint Employment Report (52), labour market,
skills and social policies were analysed for all Member States. A total of nine Member States
were identified as facing potential risks to upward social convergence. A second-stage analysis
for these nine countries was published on 21 April 2026 (53). This analysis examined in more
detail the available quantitative and qualitative evidence and the key factors driving the
challenges, taking into account policy developments. A major challenge in all Member States is
reducing poverty and social exclusion, in particular enhancing the effectiveness of social
transfers in reducing poverty. Many Member States are struggling with high shares of young
people not in employment, education or training, low levels of adult learning and basic digital
skills, and high rates of early school leaving. Further efforts are needed to better integrate
underrepresented groups into education and training, as well as the labour market. Overall, the
second-stage analysis identified challenges to upward social convergence in six Member States.
The analysis of upward social convergence points to cross-cutting challenges in all three
policy areas. While labour markets remain strong overall, the analysis highlights the need to
foster quality job creation and transitions, including by integrating inactive people into the
labour market more effectively. The analysis also points to further measures to boost quality
education and skills acquisition to address skills gaps and mismatches. At the same time, income
inequality and poverty risks require very close policy attention, also against the background of
demographic and fiscal challenges, while keeping to efficient, adequate and sustainable social
protection and inclusion systems.
49 Communication on the EU’s eastern regions bordering Russia, Belarus and Ukraine Strong regions for a safe Europe,
COM(2026) 82 final. 50 The European Ocean Pact - Oceans and fisheries - European Commission. 51 See Regulation (EU) 2024/1263, Article 3 and the underlying recital. 52 Joint Employment Report 2026, as adopted by the EPSCO Council on 9 March 2026. 53 SWD(2026)122 – Second-stage country analysis on social convergence in line with the Social Convergence Framework (SCF),
2026.
23
The findings of the social convergence analysis are reflected in the country reports and
inform the 2026 European Semester. This analysis has fed into the multilateral surveillance
reviews in the relevant committees of the Council.
Box 4: RRF closure: a turning point for EU funding, powered by reforms
The RRF, the centrepiece of the NextGenerationEU response to the COVID-19 pandemic,
mobilised a substantial volume of EU financing tied to complementary reforms and investments
that respond both to national-specific challenges and common EU priorities. With payments
linked to fulfilling milestones and targets that track progress with those reforms and investments,
the RRF design has reshaped the effectiveness and synergies of EU funding instruments, and
policy coordination, including notably under the European Semester.
Across the EU, the facility has supported ambitious reform agendas, often addressing long-
standing structural challenges in a wide variety of areas. These include:
• labour market and skills reforms, such as modernising employment protection
frameworks, strengthening active labour market policies, and improving education and
training systems to foster quality and inclusiveness and ensure that people have the skills
needed for the labour market (e.g. Italy, Greece, Luxembourg, Romania)
• pension and social protection reforms, to enhance sustainability and adequacy (e.g.
Belgium, Greece, Romania, Slovenia, Croatia)
• reforms strengthening health and long-term care systems to improve primary
healthcare and prevention, and address the needs of an ageing population (e.g. Slovakia,
Lithuania, Austria, Estonia)
• public administration and justice reforms, including the digitalisation of public
services and measures to improve judicial efficiency (e.g. Italy, Croatia, Slovakia,
Greece, Spain, Bulgaria, Romania)
• business environment reforms, such as reducing administrative burdens, improving
insolvency frameworks, and facilitating access to finance (e.g. Portugal, Cyprus, Latvia
• research and innovation reforms, such as strengthening the public research landscape,
revising R&D tax incentives for companies, and reforming R&I governance (e.g. Spain,
Croatia, Slovakia, Lithuania)
• tax and fiscal-structural reforms, broadening or shifting tax bases, tackling tax
evasion, and strengthening public financial management (e.g. Italy, Spain, Bulgaria)
• energy market, climate mitigation and environmentally friendly reforms, including
through REPowerEU, supporting the deployment of renewables, improving energy
efficiency, and reducing dependence on fossil fuels (e.g. Germany, Czechia, Poland,
Latvia, Finland, Luxembourg); and
• housing reforms, strengthening affordability by facilitating permitting procedures for
construction, creating the conditions for energy renovations and creating support
schemes for social housing (e.g. Poland, Slovenia, Ireland, Spain)
24
APPENDIX 1 – OVERVIEW OF THEMATIC AREAS COVERED IN THE COUNTRY-SPECIFIC RECOMMENDATIONS
25
APPENDIX 2 - PROGRESS ON CSR IMPLEMENTATION
The 2026 European Semester takes stock of the Member States’ policy action to address
structural challenges identified in the country-specific recommendations (CSRs) adopted in
2025. The 2026 assessment of CSRs implementation considers the policy action taken by the
Member States to date (54). It takes into account in particular the measures taken as part of the
implementation of the RRF, commitments undertaken in the RRPs as well as the medium-term
fiscal structural plans, depending on their degree of implementation. The assessment reflects the
current stage of implementation, rather than the level of progress that could be achieved assuming
full implementation of the plans (55). The 2026 CSR assessment covers the assessment of 2025
CSRs (annual assessment)(56).
Figure 1: Current level of implementation
of 2025 CSRs
Figure 2: Implementation of 2019-2025
CSRs: annual assessment in each
consecutive year
Note: The annual assessment in Figure 1 shows the progress recorded in the first year after
CSRs adoption. To be noted that 2021 CSRs only relate to fiscal policy.
Overall, there has been good progress in the implementation of CSRs adopted in 2025.
Member States have made at least “some progress” in 50% of the recommendations addressed to
them in July 2025 (Figure 1). This represents a broadly stable level compared to the annual
progress achieved in June 2025 on the CSRs adopted in October 2024. Considering the policy
54 Including policy action reported during the European Semester missions, in the CSR database, in the annual progress reports, as
well as in the RRF reporting (biannual reporting on progress in the implementation of milestones and targets and resulting from
the payment request assessment). 55 Measures foreseen in the annexes of the adopted Council Implementing Decisions on the approval of the assessment of the RRPs
or on the approval of the medium-term fiscal structural plans and which have not yet been adopted or implemented but are
considered as credibly announced in line with the CSR assessment methodology, warrant “limited progress”. 56 The 2025 CSRs provided, for each Member State, a consolidated set of recommendations on which further policy actions are
needed, based on a review of the outstanding stock of 2019-2024 CSRs, taking into consideration their coverage in the RRPs and
their continued relevance.
Full Implementation; 3%
Substantial Progress; 7%
Some Progress;
40%
Limited Progress;
42%
No Progress; 8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2019 2020 2022 2023 2024 2025 Annual assessment in year +1
Average of annual assessments 2019 -2025
26
areas under which a significant number of Member States received a recommendation in 2025,
progress has been achieved in particular on private sector debt and insolvency framework, on
budgetary framework and fiscal governance, followed by digital connectivity, infrastructures and
market functioning and wage setting. By contrast, less progress has been made in addressing
recommendations on financial services and financial stability, quality of law making and state-
owned enterprises.
The results of the 2025 CSR assessment, together with those of previous years, is available on the
Commission website.
27
APPENDIX 3 – EU-WIDE PROGRESS ON SDG IMPLEMENTATION
Note: The figure above shows the pace at which the EU has progressed towards each of the 17 goals over the most
recent 5-or 6-year period of available data, avoiding 2020 as a base year due to COVID-related outliers. The method
for assessing indicators and aggregating them at the goal-level, as well as more detailed analyses are available on
the Eurostat website: Overview - Sustainable development indicators - Eurostat (europa.eu)
28
How has the EU progressed towards the SDGs?
The overview arrow visually summarises the EU progress towards each of the 17 goals. Over the
short-term period, the EU has made significant progress towards five SDGs: ‘Decent work and
economic growth’ (SDG 8), ‘Responsible consumption and production’ (SDG 12), ‘Reduced
inequalities’ (SDG 10), ‘Gender equality’ (SDG 5) and ‘Quality education’ (SDG 4). The EU has
also progressed towards nine other SDGs, but at a moderate pace. Among these goals, the EU has
performed best for ‘Industry, innovation and infrastructure’ (SDG 9) and ‘Zero hunger’ (SDG 2).
By contrast, no progress was observed for ‘Partnerships for the goals’ (SDG 17). Moreover, the
EU has moved away from the sustainable development objectives of ’Life on land’ (SDG 15)
and ’Clean water and sanitation’ (SDG 6) due to biodiversity loss, water scarcity and deteriorating
water quality. In summary, the EU has made progress towards most SDGs, at varying paces and
despite remaining challenges, while it has stagnated on SDG 17 and fallen back on SDG 6 and
SDG 15.
29
APPENDIX 4 - MIP - FINDINGS OF IN-DEPTH REVIEWS OF MACROECONOMIC
IMBALANCES IN MEMBER STATES
Imbalances or excessive imbalances have been identified in four out of the seven Member
States for which an in-depth review was carried out. The in-depth review analysis looked at the
gravity of the vulnerabilities, their recent evolution and prospects, and related policy responses,
which are the three criteria for the classification of macroeconomic imbalances.
The paragraphs below review the most relevant vulnerabilities at this juncture, with a focus
first on cross-country developments and then in the seven Member States subject to an in-
depth review this year.
Inflation has declined further across most of the euro area and the EU, but significant
inflation differentials persist in several Member States and increases in energy prices are
now contributing to a resurgence of inflation. While inflation slowed further in 2025 and early
2026, some countries, both within and outside the euro area, have continued to record markedly
above-average inflation. However, even after accounting for the fact that part of those differentials
reflects rises in indirect taxation, inflation divergences have widened, including where the
economic activity has been subdued. Looking ahead, the disinflation process appears increasingly
at risk, and a further widening of inflation differentials cannot be excluded. At the same time, unit
labour cost growth moderated in the past year, in some cases significantly, owing to slower wage
growth and amid limited productivity gains. It however remains elevated relative to peers in
several countries. Persistent divergences in costs and prices may undermine competitiveness,
particularly in countries that have already experienced larger cost and price competitiveness losses
and record more fragile external positions. Moreover, entrenched inflation differentials risk
weakening the effectiveness of the common monetary policy.
Current account positions improved in 2025, but concerns persist over large deficits, and
latest rises in energy price can worsen current accounts. Somewhat stronger exports growth,
together with falls in energy prices, helped in narrowing the large current account deficits in 2025.
Yet, some countries still have current account deficits significantly higher than what the
fundamentals of their economies would justify. In some of the Member States subject to an IDR,
large government deficits account for much of the economy’s external financing needs, while in
others domestic demand buoyancy is the main cause. Meanwhile, significant current account
surpluses have shrunk somewhat, even if remaining elevated, thanks to faster domestic demand
growth compared to the rest of the euro area. Looking ahead, higher energy prices could hamper
or even reverse improvements in external accounts. Trade growth is also expected to slow down
compared to 2025, limiting further gains in trade balances and making them more dependent on
shifts in domestic demand.
The more negative net international investment positions often improved further in 2025,
but by less than before and that progress may soon reverse as current account deficits keep
30
accumulating. Despite the significant current account deficits, most of those positions improved
further in 2025 on account of nominal GDP growth – even if those denominator effects were
somewhat milder than in earlier years – and accelerating capital transfers. However, if those very
large current account deficits remain, negative net international investment positions could worsen.
Large positive positions declined in 2025, largely reflecting adverse valuation effects but are set
to rise if large surpluses persist.
House prices accelerated further in 2025 after a small rebound in 2024. Demand has been
boosted by increases in household real income and more supportive financing conditions, while
supply has remained constrained or even shrunk in some areas. Overvaluation risks grew in various
countries. Dysfunctional rental markets have not changed much, and certain policies, including
taxation policies incentivising debt-financed home buying, continue fuelling demand in some
countries. House prices are expected to keep rising, as housing shortages are increasing amid slow
progress in addressing supply bottlenecks.
Borrowing by households and non-financial corporations has picked up with lower interest
rates, whereas high debt ratios declined less than in previous years. Denominator effects
became less significant on account of lower nominal GDP growth which led to more limited falls
in debt ratios than in earlier years. In the Member States with high private debt ratios, the
slowdown in deleveraging has been often more pronounced in the case of households. The recent
tightening of financing conditions may dampen borrowing and increase debt service burdens
especially where variable-rates loans are widespread.
Government debt ratios have evolved diversely, sometimes declining but often increasing
depending on budget balances, while interest rates are now increasing everywhere. High
government debt ratios decreased in one country subject to an in-depth review but edged up in
other cases. Lower growth weakened debt dynamics too. Looking forward, sizeable, even if
declining, large deficits are forecast to continue adding to debt ratios in a number of cases. In 2025,
borrowing conditions improved for euro area government debts, but long-term interest rates were
much unchanged for non-euro area Members, where borrowing in foreign currencies is significant
too. Since this March, however, government bond yields have risen across various maturities.
The banking sector has remained healthy. Capital ratios have increased slightly further in 2025.
Bank profitability has remained elevated despite the decreasing contribution of the net interest
income. Non-performing loans have been broadly stable and close to historical lows on aggregate,
with limited further reductions in Member States where they used to be elevated and some
marginal increases in some cases. At the same time, non-performing loans held by servicers
outside the banking sector remain large in some Member States and their workout remains slow.
Commercial real estate remains a source of vulnerability in some cases, but financing pressures
have eased. Banks continue to hold large exposures to domestic sovereign debt in some Member
States, which have increased further in some cases.
31
Table 1: MEMBER STATES CLASSIFICATION UNDER THE MIP
2025 outcomes 2026 outcomes
No imbalances CY, DE, EE EL, NL, SE
Imbalances EL, HU, IT, NL, SE, SK HU, IT, SK
Excessive
imbalances RO RO
p.m.: No IDR AT, BE, BG, CZ, DK, ES, FI, FR, HR, IE, LT,
LU, LV, MT, PL, PT, SI
AT, BE, BG, CY, CZ, DE, DK, EE, ES, FI,
FR, HR, IE, LT, LU, LV, MT, PL, PT, SI
Note: Member States with classification changed between 2025 and 2026 are marked in bold in both columns.
Member States no longer experiencing imbalances
Greece is no longer experiencing imbalances.Vulnerabilities related to government and external
debt have receded over recent years, supported by steady GDP growth, with budgetary surpluses
further contributing to decreases in government debt; banks’ non-performing loans have declined
and balance sheets have improved; the current account deficit remains sizeable but its favourable
financing mitigates external sustainability risks; Greece has implemented relevant reforms to
reduce its long-standing vulnerabilities. While remaining high, the government debt-to-GDP ratio
has continued to decrease due to prudent fiscal policy and GDP growth, which has also supported
an improvement of the negative net international investment position. Both government debt and
external debt ratios are expected to fall further. The current account deficit has remained elevated
and is not expected to improve this year, but EU financing and private non-debt-generating
financing are expected to cover a large share of it. The labour market has improved, with the
unemployment rate decreasing further. Over the past years, banks have cleaned up their balance
sheets. The workout of non-performing loans held by servicers outside the banking sector remains
slow though. Overall policy progress has been strong and addressing the main vulnerabilities, with
the government taking a broad range of measures to improve the business environment, the labour
market, and tax administration. Looking ahead, sticking to sound fiscal policies would help further
reductions in government debt and while structural challenges related to labour productivity
remain, the European Semester will provide the framework for monitoring progress in structural
reforms.
The Netherlands is no longer experiencing imbalances. Vulnerabilities related to high levels of
household debt, the housing market, and the large current account surplus have been present over
the years but have lessened recently. The large current account surplus dipped somewhat lately
32
and part of it is structural, as the Netherlands acts as a key European trade hub and hosts many
multinational enterprises. In parallel, from a savings-investment perspective, the fall in the surplus
reflects that domestic demand has been the main contributor to recent real GDP growth and
demand has grown faster than in the rest of the euro area, albeit from lower levels. The current
account surplus is not forecast to grow this year or next. House prices continue to grow visibly
amid reduced housing supply. Household debt as a share of GDP fell again in 2025, though more
slowly than before, as borrowing increased with lower interest rates. The household debt may
stabilise in the coming years, and the risks related to high household debt are partly mitigated by
the prevalence of fixed-rate mortgages. Some policy measures have been taken to increase housing
supply, and the latest government investment agenda, including in housing, could help reduce the
current account surplus over the medium term. Looking ahead, effectively increasing housing
supply and tackling tax incentives favouring debt-financed house buying could help dampen house
prices and reduce household debt in a lasting way while boosting domestic investment would help
further narrow the current account surplus. The European Semester will provide the framework
for monitoring progress on housing reforms.
Sweden is no longer experiencing imbalances. Vulnerabilities related to its real estate market and
high levels of private debt remain but their gravity has lessened recently. While the Swedish
economy is highly sensitive to interest rates due to the widespread use of variable-rate mortgages,
it proved resilient to the higher interest rates in 2022 and 2023, which caused house prices to drop.
Since then, house prices have been stable and seem less overvalued than before. The large
commercial real estate sector showed signs of improved refinancing capacity as interest rates eased
and capital market access improved. Household debt as a share of GDP, which had been falling
since the pandemic, levelled off in 2025 and is expected to stay steady. Going forward, housing
shortages, coupled with looser borrower requirements, could push house prices and household debt
up. Banks remain strong, profitable, and with low non-performing loans. Some measures have
recently been taken aimed at making the rental market more flexible, and the regulatory framework
for building permits was tweaked in late 2025. Looking ahead, effectively increasing housing
supply and tackling tax incentives favouring debt-financed house buying, together with judicious
use of macroprudential measures, would help further dampen house price growth and reduce
household debt in a lasting way. The European Semester will provide the framework for
monitoring progress on housing reforms.
Member States experiencing imbalances
Italy continues to experience imbalances. Vulnerabilities related to high government debt and
weak productivity growth, which have cross-border relevance, persist, and continued and effective
implementation of growth-enhancing reforms and investments, together with a prudent fiscal
stance, remains crucial to reduce those vulnerabilities. Government debt as a share of GDP fell
after the pandemic but increased in 2024 and again in 2025, on account of the slowdown in nominal
GDP growth, the lagged impact of the tax credits for housing renovations of earlier years, and the
33
still sizeable government deficits. The government debt ratio is expected to continue increasing in
2026 and 2027. Productivity has declined recently and is forecast to stagnate, limiting potential
GDP growth and hence hampering reductions in the government debt ratio. Banks have
significantly strengthened their asset quality and profitability and reduced their non-performing
loans, but the high sovereign-banks nexus is still a concern, as banks’ holdings of domestic
government debt as a share of their assets is high, especially for less significant institutions and
cooperative banks. The labour market has continued to improve, but the labour potential does not
seem to be fully exploited. Measures have been taken to address the long-standing vulnerabilities
but, despite the recent extensive reform action, significant productivity gains have yet to
materialise. Looking ahead, continued and effective implementation of growth-enhancing reforms
and investments, together with a prudent fiscal stance, remains crucial to improve productivity
growth and reduce the government debt-to-GDP ratio.
Hungary continues to experience imbalances. Vulnerabilities related to competitiveness,
government financing needs, and house prices persist, and policies have continued compounding
those vulnerabilities. Inflation and unit labour costs growth have been among the highest in the
EU despite stagnating economic activity. Price and cost pressures are expected to ease only
gradually, while remaining much higher than in the euro area and EU. Government deficits have
been elevated in the past years and are not forecast to improve. Government financing needs and
debt servicing costs remain high, although the government debt-to-GDP ratio has risen only
marginally thanks to the high nominal GDP growth in the context of still elevated inflation. Banks
continue to hold large sovereign exposures, partly reflecting tax incentives. House prices have
continued to increase strongly and risks of overvaluation have risen. The current account has
remained in surplus, but Hungary’s high reliance on energy imports makes it vulnerable to higher
and more volatile energy prices. Policies have not improved and have compounded some of the
vulnerabilities. Untargeted subsidies that add to price pressures and compound fiscal challenges
have even been stepped up, while extensive government subsidised lending strain public finances
and limit the effectiveness of monetary policy. Looking ahead, effectively overcoming those
policies would reduce vulnerabilities.
Slovakia continues to experience imbalances. Vulnerabilities related to the external and
government balances, competitiveness, the housing market, and household debt persist, with policy
action remaining limited. While the current account deficit narrowed in 2025 thanks to lower
energy prices and stronger exports, it is expected to deteriorate in 2026 as the external context
worsens. The government deficit edged down in 2025 but remains large and weighing on external
balances; moreover, it is forecast to be largely unchanged in 2026 and to rise in 2027 assuming
unchanged policies, pushing government debt higher. Inflation was well above the euro area in
2025, partly due to VAT rate increases, and core inflation is forecast to stay among the highest in
the euro area in 2026. Fast-rising unit labour costs have further weakened competitiveness and are
still expected to grow relatively fast in 2026. House prices surged in 2025 amid lower mortgage
rates and are likely to keep rising briskly due to constrained supply. Household borrowing grew
34
too with lower interest rates and higher incomes. Policy progress has been limited. Looking ahead,
effectively addressing key issues in labour taxation, competitiveness, housing supply, and fiscal
policy would reduce vulnerabilities.
Member States experiencing excessive imbalances
Romania continues to experience excessive imbalances. Vulnerabilities related to fiscal and
current account deficits have diminished somewhat recently but remain very significant, while cost
competitiveness continues deteriorating albeit less than before. The government deficit fell in
2025 as result of marked consolidation efforts; a further fall of the deficit is expected for 2026 and
2027, but the deficit would still remain large. The bank-sovereign nexus continues to be significant
as banks’ holdings of domestic government bonds as a share of total assets are the largest in the
EU and increased in 2025. The current account deficit improved only marginally in 2025 and is
forecast to remain large even if declining somewhat more this year. Unit labour costs slowed down
markedly in 2025 after very strong growth in earlier years, but are expected to still grow faster
than in most of the EU. Core inflation was the highest in the EU in recent years – with increases
in VAT rates in 2025 only explaining part of it and is expected to remain high. Policy progress
was significant in 2025, especially on reducing the budget deficit thanks to a two-year freeze of
government wages and pensions, and increases in VAT rates and other taxes. Looking ahead,
without further vigorous fiscal consolidation, complemented by prudent income policies and
effective structural reforms, Romania remains exposed to rising interest rates and changes in
investor confidence.
35
APPENDIX 5 - FISCAL SURVEILLANCE UNDER THE REFORMED STABILITY AND
GROWTH PACT
Assessment by Member State (57)
The reformed Economic Governance framework has now reached a steady state of implementation.
By 2025, all Member States had submitted their medium-term fiscal-structural plans (henceforth,
medium-term plans or MTPs). In 2026, following the formation of new governments, Ireland and
the Netherlands have submitted new MTPs.
The Annual Progress Reports (APRs) submitted by Member States at the end of April (58) take
stock of the progress made in the implementation of these medium-term plans and the respective
Council recommendations. Together with the Commission Spring 2026 Forecast, and outturn data
for 2024 and 2025 provided by Eurostat, the APRs provide key inputs for the assessment of
Member States’ compliance with the recommended fiscal path and, where relevant, for the
assessment of the implementation of reforms and investments underpinning an extension of the
fiscal adjustment period (59).
Table 2 Overview of Member States’ compliance with the recommended net expenditure growth rates
2026
Projected
compliance
At risk of
non-compliance
At risk of
material non-compliance
2025
Compliance
BE*, AT*, PL*, RO*,
SK*, FI*, CZ, DK, DE,
EE, EL, FR*C, LV
SEC
FR*,A, ES HU*, SEA
Non-compliance IT* PT LT, SI
Material non-compliance IE LU, NL MT**, BG, HR, CY
*Member States in EDP. **For Malta, the Commission recommends to the Council the abrogation of the decision
establishing an excessive deficit. Member States not in EDP for which, in 2025, the government deficit was
below 3% of GDP and the debt ratio below 60% of GDP, or the government balance was close to balance or in
surplus (60). A2026 assessment based on the annual growth rate of net expenditure. C2026 assessment based on the
cumulative growth rate of net expenditure.
Notes: Where net expenditure growth is higher than recommended (i.e. positive deviations), the size of the
deviation is assessed in relation to the thresholds of 0.3% of GDP in annual terms and 0.6% of GDP in cumulative
terms. A positive deviation below one of these thresholds entails an assessment of (a risk of) non-compliance,
while a deviation above one of these thresholds entails an assessment of (a risk of) material non-compliance. For
Member States for which the national escape clause for defence has been activated, the assessment takes into
57 See also Box 5 at the end of this Appendix. 58 The 2026 Annual Progress Reports are available on: https://economy-finance.ec.europa.eu/economic-and-fiscal-
governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en. Hungary has to date not yet submitted its APR. 59 This is relevant for Belgium, Germany, Spain, France, Italy, Austria, Romania and Finland. 60 A fiscal position ‘close to balance’ is defined as a general government deficit not exceeding 0.5% of GDP, according to recital
14 in Council Regulation (EU) 2024/1264.
36
account the corresponding flexibility and is based only on net expenditure growth in cumulative terms. For Ireland,
the Netherlands and Finland, the assessment of 2026 is carried out against the latest recommendations, while 2025
is assessed against their previous recommendations.
Member States currently under EDP
The Commission has assessed effective action for 2025 on the basis of outturn data. For 2026, the
assessment is based on the Commission Spring 2026 Forecast and it should be considered as
preliminary, with a reassessment to take place in autumn 2026 and in spring 2027 based on outturn
data. A stepping-up of the excessive deficit procedure in the absence of outturn data would only
be considered in particularly serious cases of non-compliance. A Member State that adheres to the
corrective path should be considered as having taken effective action. When the net expenditure
growth deviates from the corrective path, the Commission will carry out an overall assessment.
Belgium - The net expenditure growth in 2025 is above the ceilings recommended by the Council.
However, the corresponding cumulated deviation is within the flexibility provided by the national
escape clause, taking into account the increase in defence spending. In 2026, both the annual and
the cumulative growth rates of net expenditure are projected to be below the recommended ceilings.
Therefore, after considering the flexibility provided by the national escape clause, Belgium is
assessed to be compliant with the recommended maximum growth rate of net expenditure in
2025 and projected to be compliant in 2026. At this stage, the Commission assesses Belgium
as having taken effective action. As a result, the EDP is held in abeyance.
When it comes to the set of reforms and investments underpinning the extension of the adjustment
period, the Commission finds that the implementation of the key steps of these reforms and
investments that were due by 30 April 2026 seems to be broadly on track. However, some reforms
experience a delay in implementation. Namely, the adoption of the pension reform by the
Parliament, that was due in Q4-2025, is now expected in 2026. The tax reforms, due in Q1-2026,
have been partly implemented and the remaining parts are expected to be finalized by July 2026.
The two reforms to improve the budgetary coordination between different levels of government,
due in Q4-2025, have been largely agreed at government level and now need to be legislated,
which is expected to be completed by the end of 2026. The Commission considers that, overall,
Belgium has complied with its commitments in a satisfactory manner.
France - The net expenditure growth in 2025 is below the ceilings recommended by the Council
both in annual and cumulative terms. In 2026, the annual net expenditure growth is above the
ceiling recommended by the Council whereas the cumulative net expenditure growth is below the
recommended ceiling. Therefore, France is assessed to be compliant with the maximum growth
rate of net expenditure in 2025. In 2026, France is projected to be at risk of non-compliance
with the recommended annual growth rate of net expenditure in 2026, while it is projected
to be compliant with the cumulative growth rate. At this stage, the Commission assesses
France as having taken effective action. As a result, the EDP is held in abeyance. At the same
37
time, on current projections, France may fall short of delivering effective action in 2026, which
could then require a stepping up of the EDP. Hence, the Commission recommends to the Council
to invite France to ensure that net expenditure respects the corrective path.
When it comes to the set of reforms and investments underpinning the extension of the adjustment
period, the Commission finds that the implementation of the key steps of these reforms and
investments that were due by 30 April 2026 seems to be broadly on track. However, the recasting
of the exemptions of social security contributions around the minimum salary has yielded lower
savings than committed. The Commission considers that, overall, France has complied with
its commitments in a satisfactory manner. Looking ahead, the 2023 pension reform has been
suspended until January 2028.
Italy - The net expenditure growth in 2025 is above the ceilings recommended by the Council both
in annual and cumulative terms, although only marginally above in cumulative terms. The net
expenditure growth in 2026 is projected to be below the ceilings recommended by the Council
both in annual and cumulative terms. Therefore, Italy is assessed to be non-compliant with the
recommended maximum growth rate of net expenditure in 2025, but it is projected to be
compliant in 2026. The deviation in 2025 requires an overall assessment. Taking account of the
decline in the nominal deficit, the projected correction of the excessive deficit situation as of 2026,
and the small size of the deviation in 2025, the Commission considers Italy as having taken
effective action. As a result, the EDP is held in abeyance. At the same time, the Commission
recommends to the Council to invite Italy to ensure that net expenditure respects the corrective
path.
When it comes to the set of reforms and investments underpinning the extension of the adjustment
period, the Commission finds that the implementation of the key steps of these reforms and
investments that were due by 30 April 2026 seems to be broadly on track. With regard to the key
step due by Q4-2025 related to the increase in public spending on research and development
(R&D), measured by R&D expenditure in GERD terms as a share of GDP, the latest available
Eurostat statistics refer to 2024. Nevertheless, preliminary estimates provided by the Italian
authorities indicate that R&D expenditure in GERD terms is expected to have reached 0.59% of
GDP in 2025, suggesting that Italy appears to be on track with the target. The Commission
considers that, overall, Italy has complied with its commitments in a satisfactory manner.
Hungary - The net expenditure growth in 2025 is above the ceilings recommended by the Council
both in annual and cumulative terms. However, the corresponding cumulated deviation is within
the flexibility provided by the national escape clause, taking into account the increase in defence
spending. In 2026, both the annual and the cumulative growth rates of net expenditure are projected
to be above the recommended ceilings. The corresponding cumulated deviation for 2026 is
projected to remain above 0.6% of GDP (strong presumption of no effective action) after taking
into account the flexibility for higher defence spending provided for by the national escape clause.
Therefore, after considering the flexibility provided by the national escape clause, Hungary
38
is assessed to be compliant with the recommended maximum growth rate of net expenditure
in 2025, whereas it is projected to be at risk of material non-compliance in 2026. At this stage,
the Commission assesses Hungary as having taken effective action in 2025. As a result, the
EDP is held in abeyance. At the same time, the projected risk of material non-compliance in 2026
would entail a strong presumption of no effective action and could require a stepping up of the
EDP. Hence, the Commission recommends to the Council to invite Hungary to take action to
control net expenditure so that it respects the corrective path. Furthermore, there is a clear risk
that Hungary will not correct the excessive deficit by 2026 (61), which is the final year of the
corrective path. Therefore, there will be a need for the Commission to recommend to the Council
to adopt a revised recommendation under Article 126(7) to establish a corrective path for the
subsequent years (62).The Commission will monitor this situation closely and reassess the situation
in autumn.
Austria - The net expenditure growth in 2025 is below the ceilings recommended by the Council.
Similarly, in 2026, net expenditure growth is projected to be below the ceilings recommended by
the Council both in annual and cumulative terms. Therefore, Austria is assessed to be compliant
with the recommended maximum growth rate of net expenditure in 2025, and it is projected
to be compliant in 2026. At this stage, the Commission assesses Austria as having taken
effective action. As a result, the EDP is held in abeyance.
When it comes to the set of reforms and investments underpinning the extension of the adjustment
period, the Commission finds that the implementation of the key steps of these reforms and
investments that were due by 30 April 2026 seems to be broadly on track. The Commission
considers that, overall, Austria has complied with its commitments in a satisfactory manner.
Malta – Malta successfully reduced its general government deficit to below 3% of GDP in 2025,
in advance of the deadline that the Council had established. Based on the Commission Spring 2026
Forecast, the deficit is projected to remain below 3% of GDP also in 2026 and 2027. Therefore,
the Commission is today recommending to the Council to adopt a decision under Article
126(12) to abrogate the Council decision of 26 July 2024 on the existence of an excessive
deficit in Malta.
At the same time, the Commission notes that the Council recommendation of 21 January 2025 that
endorsed the medium-term plan of Malta continues to apply. Compared to the latter
recommendation, the annual growth rate of net expenditure in 2025 was below the recommended
ceiling, whereas it was above in cumulative terms, with the deviation above 0.6% of GDP. In 2026,
the net expenditure growth is projected to be above the ceilings recommended by the Council both
in annual and cumulative terms with the corresponding deviation in cumulative terms projected to
61 Based on data provided by Eurostat, Hungary’s general government deficit decreased from 5.1% of GDP in 2024 to 4.7% of
GDP in 2025. Based on policy measures known by the cut-off date of the forecast, the Commission Spring 2026 Forecast projects
a deficit of 6.2% of GDP in 2026 and 5.8% of GDP in 2027. 62 On 1 June 2026, Hungary informed the Commission about its intention to submit a revised national medium-term fiscal-structural
plan.
39
be above 0.6% of GDP (63). Therefore, Malta is assessed to be materially non-compliant with the
recommended maximum growth rate of net expenditure in 2025 and projected to be at risk of
material non-compliance in 2026. Hence, the Commission recommends to the Council to invite
Malta to take action to control net expenditure so that it respects the recommended maximum
growth rates.
Poland - The net expenditure growth in 2025 is above the ceilings recommended by the Council
both in annual and cumulative terms. However, the corresponding cumulated deviation is within
the flexibility provided by the national escape clause, taking into account the increase in defence
spending. In 2026, the annual growth rate of net expenditure is projected to be below the
recommended ceiling, whereas cumulative net expenditure growth is projected to be above the
recommended ceiling. However, the cumulated deviation is projected to be within the flexibility
provided by the national escape clause based on current projections for defence spending.
Therefore, after considering the flexibility provided by the national escape clause, Poland is
assessed to be compliant with the recommended maximum growth rate of net expenditure in
2025, and it is projected to be compliant in 2026. At this stage, the Commission assesses
Poland as having taken effective action. As a result, the EDP is held in abeyance.
Romania - The net expenditure growth in 2025 is below the ceilings recommended by the Council,
thanks to the large fiscal policy packages adopted in the second half of 2025. Similarly, in 2026,
net expenditure growth is projected to be below the ceilings recommended by the Council both in
annual and cumulative terms. Therefore, Romania is assessed to be compliant with the
recommended maximum growth rate of net expenditure in 2025, and it is projected to be
compliant in 2026. At this stage, the Commission assesses Romania as having taken effective
action. As a result, the EDP is held in abeyance. At the same time, the Commission stresses that
the fiscal situation in Romania remains fragile with the largest 2025 deficit ratio in the Union and
where there are serious implementation risks which require a strong and persistent focus on fiscal
adjustment in 2026 and subsequent years.
When it comes to the set of reforms and investments underpinning the extension of the adjustment
period, the Commission finds that the implementation of the key steps of these reforms and
investments that were due by 30 April 2026 seems to be broadly on track. Preparatory work on the
reform of the public sector remuneration system is ongoing at technical level, and a new Law is
expected to be adopted in the course of the summer 2026. Some further measures need to be taken
in the field of tax administration, in particular with a view to reducing Romania’s very high VAT
compliance gap. Further work is also ongoing on the property taxation reform, including the
development of the IT system for automated property assessment, the operationalisation of the
63 The decrease in the deficit in 2025 reflects high revenue growth, including from corporate and indirect taxation, mainly driven
by the expansion of nominal GDP and tax bases, as well as significant tax windfalls. On the other hand, notwithstanding the non-
repetition of a sizeable capital transfer granted to the national airline company in 2024, government expenditure continued to
increase significantly, with substantial increases in the government’s wage bill and intermediate consumption, as well as a one-off
expenditure arising from a court decision.
40
specialised structure for monitoring public expenditure systems, and the business financing reform.
The Commission considers that, overall, Romania complied with its commitments in a
satisfactory manner.
Slovakia - The net expenditure growth in 2025 is below the ceilings recommended by the Council
in both annual and cumulative terms. In 2026, the annual growth rate of net expenditure is
projected to be above the recommended ceiling, whereas the cumulative one is projected below.
Therefore, after considering the flexibility provided by the national escape clause, Slovakia is
assessed to be compliant with the recommended maximum growth rate of net expenditure in
2025, and it is projected to be compliant in 2026. At this stage, the Commission assesses
Slovakia as having taken effective action. As a result, the EDP is held in abeyance.
Finland - Compliance with the net expenditure growth in 2025 is assessed based on the Council
recommendation of 21 January 2025, whereas for 2026 the relevant Council recommendation is
the one of 20 January 2026. For Finland, the net expenditure growth in 2025 is below the ceilings
recommended by the Council in both annual and cumulative terms. Differently, the net expenditure
growth in 2026 is projected to be above the ceilings recommended by the Council both in annual
and cumulative terms. However, the cumulated deviation is within the flexibility provided by the
national escape clause based on current projections for defence spending. Therefore, after
considering the flexibility provided by the national escape clause, Finland is assessed to be
compliant with the recommended maximum growth rate of net expenditure in 2025, and it
is projected to be compliant in 2026. At this stage, the Commission assesses Finland as having
taken effective action. As a result, the EDP is held in abeyance.
When it comes to the set of reforms and investments underpinning the extension of the adjustment
period, the Commission finds that the implementation of the key steps of these reforms and
investments that were due by 30 April 2026 seem to be broadly on track. As regards the correction
of deficits of the wellbeing services counties, although expenditure growth has moderated, the
accumulated deficits of some counties are considered too large to be corrected by the end of 2026
without jeopardising service provision. The government has therefore presented a proposal to
extend the deadline to the end of 2029 for those regions with credible plans to address the deficit.
The Commission considers that, overall, Finland has complied with its commitments in a
satisfactory manner.
Other Member States
Bulgaria - The government deficit in Bulgaria exceeded the reference value of 3% of GDP in
2025, and the Commission projects the deficit in 2026 at 4.1%. Therefore, Bulgaria has been
included in the report under Article 126(3) TFEU assessing compliance with the deficit criterion.
In particular, while the deficit was below 3% of GDP in 2025 when accounting for the increase in
defence expenditure since 2024 under the National Escape Clause for defence, it is projected to
41
exceed the 3% of GDP reference value in 2026 when accounting for this increase, based on the
Commission Spring 2026 Forecast. Taking into account the Opinion of the Economic and
Financial Committee on that report, the Commission will consider proposing to open an
excessive deficit procedure for Bulgaria.
For Bulgaria, the net expenditure growth in 2025 is above the ceilings recommended by the
Council. The corresponding cumulated deviation remains above 0.6% of GDP after taking into
account the flexibility for higher defence spending provided for by the national escape clause. In
2026, the growth rate of net expenditure is projected to be above the recommended ceiling both in
annual and cumulative terms. The corresponding cumulated deviation is projected to remain above
0.6% of GDP after taking into account the flexibility for higher defence spending provided for by
the national escape clause. Therefore, after considering the flexibility provided by the national
escape clause, Bulgaria is assessed to be materially non-compliant with the recommended
maximum growth rate of net expenditure in 2025 and is projected to be at risk of material
non-compliance in 2026. Hence, the Commission recommends to the Council to invite Bulgaria
to adhere to the maximum growth rates of net expenditure that the Commission assumes will be
recommended by the Council, with a view to bringing an end to the situation of an excessive deficit.
Czechia - The annual net expenditure growth in 2025 is above the ceiling recommended by the
Council, whereas the cumulative net expenditure growth is below the recommended ceiling. In
2026, the annual net expenditure growth is projected to be above the ceiling recommended by the
Council whereas the cumulative net expenditure growth is projected below the recommended
ceiling, with a deviation of 0.1% of GDP in cumulative terms. However, the projected cumulated
deviation is within the flexibility of the national escape clause based on current projections for
defence spending. Therefore, after considering the flexibility provided by the national escape
clause, Czechia is assessed to be compliant with the recommended maximum growth rate of
net expenditure in 2025 and is projected to be compliant in 2026 (64).
Denmark - The annual net expenditure growth in 2025 is above the ceiling recommended by the
Council, whereas the cumulative net expenditure growth is below the recommended ceiling. In
2026, the annual net expenditure growth is projected to be above the ceiling recommended by the
Council whereas the cumulative net expenditure growth is projected below the recommended
ceiling. Therefore, after considering the flexibility provided by the national escape clause,
Denmark is assessed to be compliant with the recommended maximum growth rate of net
expenditure in 2025, and it is projected to be compliant in 2026.
Germany - The net expenditure growth in 2025 is below the ceilings recommended by the Council.
The net expenditure growth in 2026 is projected to be above the ceilings recommended by the
Council both in annual and cumulative terms. However, the projected deviation in cumulative
terms in 2026 is within the flexibility provided by the national escape clause based on current
64 On 12 May 2026, Czechia informed the Commission about its intention to submit a revised national medium-term fiscal-
structural plan.
42
projections for defence spending. Therefore, after considering the flexibility provided by the
national escape clause, Germany is assessed to be compliant with the recommended
maximum growth rate of net expenditure in 2025, and it is projected to be compliant in 2026.
Due to the planned general government deficit above the 3% of GDP deficit reference value in
2026, Germany has been assessed in the report under Article 126(3) TFEU. In light of the
assessment in that report, the Commission is of the view that there is no case to open an excessive
deficit procedure for Germany. Fiscal developments in Germany will be reassessed in autumn
2026.
When it comes to the set of reforms and investments underpinning the extension of the adjustment
period, the Commission finds that the implementation of the key steps of these reforms and
investments that were due by 30 April 2026 seems to be broadly on track. The Commission
considers that, overall, Germany has complied with its commitments in a satisfactory
manner.
Estonia - The net expenditure growth in 2025 is below the ceilings recommended by the Council
both in annual and cumulative terms. However, the net expenditure growth in 2026 is projected to
be above the ceilings recommended by the Council both in annual and cumulative terms. Although
most of the increase in defence spending in Estonia took place in previous years, the projected
deviation in cumulative terms in 2026 is within the flexibility provided by the national escape
clause based on current projections for defence spending. Therefore, after considering the
flexibility provided by the national escape clause, Estonia is assessed to be compliant with
the recommended maximum growth rate of net expenditure in 2025, and it is projected to be
compliant in 2026.
Due to the planned general government deficit above the 3% of GDP deficit reference value in
2026, Estonia has been assessed in the report under Article 126(3) TFEU. In light of the assessment
in that report, the Commission is of the view that there is no case to open an excessive deficit
procedure for Estonia. Fiscal developments in Estonia will be reassessed in autumn 2026.
Ireland - Compliance with the net expenditure growth in 2025 is assessed based on the Council
recommendation of 21 January 2025, whereas for 2026 the relevant Council recommendation is
the one of 10 March 2026. The annual net expenditure growth in 2025 is above the ceiling
recommended by the Council on 21 January 2025, and the corresponding deviation is marginally
above 0.3% of GDP, while the cumulative net expenditure growth rate is below the recommended
ceiling. In 2026, both the annual and cumulative growth rates of net expenditure are projected to
be below the ceilings recommended by the Council in its recommendation of 10 March 2026. At
the same time, the Commission notes that the budgetary position in 2025 is in surplus and projected
to be in surplus also in 2026. Therefore, Ireland is deemed to be compliant with the budgetary
policy obligations of the Stability and Growth Pact in 2025 and it is projected to be compliant
in 2026. Hence, the Commission recommends to the Council to invite Ireland to adhere to the
maximum growth rates of net expenditure recommended by the Council on 10 March 2026.
43
Greece - The net expenditure growth in 2025 is below the ceilings recommended by the Council
both in annual and cumulative terms. Meanwhile, net expenditure growth in 2026 is projected to
be above the ceilings recommended by the Council both in annual and cumulative terms. However,
the projected deviation in cumulative terms in 2026 is within the flexibility provided by the
national escape clause based on current projections for defence spending. Therefore, after
considering the flexibility provided by the national escape clause, Greece is assessed to be
compliant with the recommended maximum growth rate of net expenditure in 2025, and it
is projected to remain compliant in 2026.
Spain - The net expenditure growth in 2025 is above the ceilings recommended by the Council
both in annual and cumulative terms. However, the cumulated deviation is within the flexibility
provided by the national escape clause65 based on current estimates for defence spending. The net
expenditure growth in 2026 is projected to be above the ceilings recommended by the Council
both in annual and cumulative terms. The corresponding cumulated deviation reduces to below the
0.6% of GDP threshold after taking into account the flexibility for higher defence spending
provided for by the national escape clause. Therefore, after considering the flexibility provided
by the national escape clause, Spain is assessed to be compliant with the maximum growth
rate of net expenditure in 2025 and projected to be at risk of non-compliance in 2026. Hence,
the Commission recommends to the Council to invite Spain to ensure that net expenditure respects
the recommended maximum growth rates.
When it comes to the set of reforms and investments underpinning the extension of the adjustment
period, the Commission finds that the implementation of the key steps of these reforms and
investments that were due by 30 April 2026 seems to be broadly on track. The tax reform is still
being assessed and the tax benefits reform, along with two steps related to the digital
transformation of education will be assessed under the last payment of the RRP. As regards the
measures to improve the management of temporary disability, partnership agreements with the
National Social Security Institute were signed by most regions whereas the agreements with
mutual societies have only been signed by three regions and two autonomous cities. Regarding the
homologation of diplomas, a ministerial order has been adopted and put in place setting
instructions for the management of homologation and equivalence procedures for foreign
university qualifications. The Commission considers that, overall, Spain has complied with its
commitments in a satisfactory manner.
Croatia - The net expenditure growth in 2025 is above the ceilings recommended by the Council
both in annual and cumulative terms. The corresponding cumulated deviation remains above 0.6%
of GDP after taking into account the flexibility for higher defence spending provided for by the
65 For Spain, on 22 May 2026 the Commission has adopted a recommendation to the Council to activate the national escape clause
for defence, which is now pending adoption by the Council. The assessment of compliance for Spain assumes that the Council will
activate the national escape clause.
44
national escape clause. Similarly, the net expenditure growth in 2026 is projected to be above the
ceilings recommended by the Council both in annual and cumulative terms. The corresponding
cumulated deviation is projected to remain above that threshold after taking into account the
flexibility for higher defence spending provided for by the national escape clause. Therefore, after
considering the flexibility provided by the national escape clause, Croatia is assessed to be
materially non-compliant with the recommended maximum growth rate of net expenditure
in 2025, and it is projected to be at risk of material non-compliance in 2026. Hence, the
Commission recommends to the Council to invite Croatia to take action to control net expenditure
so that it respects the recommended maximum growth rates. At the same time, the Commission
notes that, for Croatia,the public debt ratio is below the 60% of GDP reference value in 2025, and
the general government deficit and public debt are projected below 3% and 60% of GDP
respectively in 2026.
Cyprus - The net expenditure growth in 2025 is above the ceilings recommended by the Council
both in annual and cumulative terms. The corresponding deviations are above 0.3% of GDP and
0.6% of GDP respectively. Similarly, the net expenditure growth in 2026 is projected to be above
the ceilings recommended by the Council both in annual and cumulative terms, and the
corresponding deviations are above 0.3% of GDP and 0.6% of GDP respectively. At the same time,
the Commission notes that the budgetary position in 2025 is in surplus and projected to be in
surplus also in 2026. Therefore, Cyprus is deemed to be compliant with the budgetary policy
obligations of the Stability and Growth Pact both in 2025 and 2026. However, net expenditure
growth is projected to be above the recommended ceilings. Hence, the Commission recommends
to the Council to invite Cyprus to ensure that net expenditure respects the recommended maximum
growth rates.
Latvia - The net expenditure growth in 2025 is below the ceilings recommended by the Council
in both annual and cumulative terms. In 2026, the annual net expenditure growth is above the
ceiling recommended by the Council, whereas the cumulative net expenditure growth is below the
recommended ceiling. Therefore, after considering the flexibility provided by the national
escape clause, Latvia is assessed to be compliant with the recommended maximum growth
rate of net expenditure in 2025, and it is projected to be compliant in 2026.
Due to the planned general government deficit above the 3% of GDP deficit reference value in
2026, Latvia has been assessed in the report under Article 126(3) TFEU.In light of the assessment
in that report, the Commission is of the view that, taking into account all the relevant factors as
appropriate, the deficit criterion is fulfilled by Latvia. Fiscal developments in Latvia will be
reassessed in autumn 2026.
Lithuania - The net expenditure growth in 2025 is above the ceilings recommended by the Council.
The corresponding cumulated deviation reduces to below 0.6% of GDP after taking into account
the flexibility for higher defence spending provided for by the national escape clause. Similarly,
the net expenditure growth in 2026 is projected to be above the ceilings recommended by the
45
Council both in annual and cumulative terms. The corresponding cumulated deviation in 2026 is
projected to remain above 0.6% of GDP after taking into account the flexibility for higher defence
spending provided for by the national escape clause. Therefore, after considering the flexibility
provided by the national escape clause, Lithuania is assessed to be non-compliant with the
recommended maximum growth rate of net expenditure in 2025, and it is projected to be at
risk of material non-compliance in 2026. Therefore, the Commission recommends to the Council
to invite Lithuania to take action to control net expenditure so that it respects the maximum growth
rates. At the same time, the Commission notes thatthe general government deficit and public debt
ratios in Lithuania are below the 3% and 60% of GDP in 2025 and projected to be so also in 2026.
Luxembourg - The net expenditure growth in 2025 is above the ceilings recommended by the
Council in both annual and cumulative terms, and the corresponding deviations are above 0.3% of
GDP and 0.6% of GDP respectively. In 2026, the annual growth rate of net expenditure is projected
to be below the recommended ceiling, whereas the cumulative one is projected above, with a
corresponding deviation of less than 0.1% of GDP in cumulative terms. Therefore, Luxembourg
is assessed to be materially non-compliant with the maximum growth rate of net expenditure
in 2025 and projected to be at risk of non-compliance in 2026 due to a deviation in cumulative
terms of less than 0.1% of GDP. Hence, the Commission recommends to the Council to invite
Luxembourg to take action to control net expenditure so that it respects the recommended
maximum growth rates. At the same time, the Commission notes that the general government
deficit and public debt ratios in Luxembourg are below the 3% and 60% of GDP ratios in 2025
and projected to be so also in 2026.
The Netherlands -Compliance with the net expenditure growth in 2025 is assessed on the basis
of the Council recommendation of 21 January 2025. For 2026, the recommendation which has
been used for the present assessment is the one adopted today by the Commission, pending
adoption by the Council. In 2025, both the annual and cumulative net expenditure growth rates of
the Netherlands are above the ceilings recommended by the Council on 21 January 2025, and the
corresponding deviations are above 0.3% of GDP and 0.6% of GDP respectively. In 2026, the
growth rate of net expenditure is projected to be above the ceiling in the recommendation for a
Council recommendation endorsing the revised medium-term plan of the Netherlands, adopted
today by the Commission. Therefore, the Netherlands is assessed to be materially non-
compliant with the recommended maximum growth rate of net expenditure in 2025, and it
is projected to be at risk of non-compliance in 2026. Hence, the Commission recommends to
the Council to invite the Netherlands to adhere to the maximum growth rates of net expenditure,
which are expected to be endorsed by the Council. At the same time, the Commission notes that
the general government deficit and public debt ratios in the Netherlands are below the 3% and 60%
of GDP ratios in 2025 and projected to be so also in 2026.
Portugal - The net expenditure growth in 2025 is above the ceilings recommended by the Council
both in annual and cumulative terms. Similarly, the net expenditure growth in 2026 is projected to
be above the ceilings recommended by the Council both in annual and cumulative terms. After
46
taking into account the flexibility for higher defence spending provided for by the national escape
clause, the corresponding cumulated deviations are projected to be below 0.6% of GDP in both
years. At the same time, the Commission notes that the budgetary position in 2025 is in surplus
and projected to be close to balance in 2026. Therefore, Portugal is deemed to be compliant with
the budgetary policy obligations of the Stability and Growth Pact both in 2025 and 2026.
However, after considering the flexibility provided by the national escape clause, net expenditure
growth is projected to be above the recommended ceilings. Hence, the Commission recommends
to the Council to invite Portugal to ensure that net expenditure respects the recommended
maximum growth rates.
Slovenia - The net expenditure growth in 2025 is above the ceilings recommended by the Council
both in annual and cumulative terms. Similarly, the net expenditure growth in 2026 is projected to
be above the ceilings recommended by the Council both in annual and cumulative terms. After
taking into account the flexibility for higher defence spending provided for by the national escape
clause, the corresponding cumulated deviations are projected to be below and above the 0.6% of
GDP in 2025 and 2026 respectively. Therefore, after considering the flexibility provided by the
national escape clause, Slovenia is assessed to be non-compliant with the maximum growth
rate of net expenditure in 2025 and projected to be at risk of material non-compliance in
2026. Hence, the Commission recommends to the Council to invite Slovenia to take action to
control net expenditure so that it respects the recommended maximum growth rates. A
confirmation of the material non-compliance based on outturn data for 2026 could trigger a report
under Article 126(3) TFEU for the assessment of compliance with the debt criterion.
Due to the planned general government deficit above the 3% of GDP deficit reference value in
2026, Slovenia has been assessed in the report under Article 126(3) TFEU. In light of the
assessment in that report, the Commission is of the view that there is no case to open an excessive
deficit procedure for Slovenia at this stage. Fiscal developments in Slovenia will be reassessed in
autumn 2026. However, significant uncertainty remains over the fiscal outlook for Slovenia in
2026. If sufficient corrective measures are not taken in a credible and timely manner, this may lead
to the opening of the excessive deficit procedure based on the deficit criterion in autumn.
Sweden - The net expenditure growth in 2025 is below the ceilings recommended by the Council
in both annual and cumulative terms. In 2026, the net expenditure growth is projected to be above
the ceiling recommended by the Council in annual terms, with the corresponding deviation being
projected above 0.3% of GDP. However, the net expenditure growth in cumulative terms is
projected below the recommended ceiling. Therefore, Sweden is assessed to be compliant with
the recommended maximum growth rate of net expenditure in 2025. In 2026, Sweden is
projected to be at risk of material non-compliance with the recommended annual growth
rate of net expenditure, while it is projected to be compliant with the cumulative growth rate.
Hence, the Commission recommends to the Council to invite Sweden to ensure that net
expenditure respects the recommended maximum growth rates. At the same time, the Commission
47
notes thatthe general government deficit and public debt ratios in Sweden are below the 3% and
60% of GDP ratios in 2025 and projected to be so also in 2026.
48
Table 3 Annual and cumulated deviations (% GDP) of net expenditure growth
Annual and cumulated deviations (% GDP)
Annual
deviation
Cumulated
deviation
National
escape clause
(NEC)
Reference
year for NEC
Cumulated
deviation
taking into account
flexibility from
NEC
2025 2026 2025 2026 2025 2026
(A) (B) (C) (D) (E) (F) (G) (H)
Member States under the excessive deficit procedure
BE 0.1 -0.3 0.1 -0.2 Yes 2021 -0.5 -0.9
FR 0.0 0.1 -0.3 -0.2 No - - -
IT 0.1 -0.1 0.0 -0.1 No - - -
HU 1.5 2.3 0.8 3.0 Yes 2021 0.0 1.9
MT* -0.1 0.1 2.3 2.2 No - - -
AT -0.3 -0.1 -0.3 -0.4 Yes 2021 -0.4 -0.7
PL 0.9 -0.2 1.2 1.0 Yes 2021 -0.3 -0.5
RO -0.8 -0.3 -0.8 -1.0 No - - -
SK -0.9 0.8 -1.9 -1.0 Yes 2021 -2.5 -1.6
FI -1.0 1.5 -1.0 0.5 Yes 2021 -1.6 -0.9
Other Member States
BG 2.1 0.2 2.1 2.2 Yes 2024 1.4 1.6
CZ 0.2 1.5 -1.4 0.1 Yes 2021 -1.7 -0.2
DK 1.0 0.4 -0.6 -0.1 Yes 2021 -1.6 -1.5
DE -0.3 0.5 -0.3 0.3 Yes 2021 -0.7 -0.5
EE -2.0 2.8 -1.4 1.5 Yes 2021 -2.9 0.0
IE -0.5 -0.1 -0.5 -0.6 No - - -
EL -0.3 1.5 -1.3 0.2 Yes 2024 -1.5 -0.2
ES^ 0.4 0.6 0.1 0.7 Yes 2024 -0.1 0.4
HR 1.8 0.3 1.4 1.6 Yes 2021 0.9 1.0
CY 1.3 0.9 1.0 1.8 No - - -
LV -0.4 1.2 -1.9 -0.6 Yes 2021 -2.6 -2.1
LT 1.5 0.7 1.5 2.2 Yes 2021 0.3 0.7
LU 1.3 -0.6 0.6 0.0 No - - -
NL - 0.1 - 0.1 No - - -
PT 0.2 0.2 0.4 0.6 Yes 2021 0.4 0.6
SI 1.4 1.2 0.5 1.7 Yes 2021 0.3 1.2
SE -0.9 1.0 -1.1 0.0 No - - -
49
Table 3 - continued
Annual and cumulated deviations (% GDP) – previous recommendations§
Annual
deviation
Cumulated
deviation
National
escape clause
(NEC)
Reference
year for NEC
Cumulated deviation
taking into account
flexibility from NEC
2025 2026 2025 2026 2025 2026
(A) (B) (C) (D) (E) (F) (G) (H)
IE 0.3 - -0.1 - No - - -
NL 1.5 - 1.0 - No - - -
FI -1.3 - -1.5 - Yes 2021 -2.5 -
Note: A positive (negative) deviation indicates net expenditure growth exceeding (remaining below) the
maxima recommended by the Council. For Member States for which the national escape clause for defence
spending has been activated, deviations above the threshold of 0.6% of GDP in columns (G) and (H) are
highlighted in bold. For the rest of Member States, deviations in columns (A) to (D) are shown in bold if these
are above the 0.3% of GDP (annual terms) and/or 0.6% of GDP (in cumulative terms) thresholds. Please note
that the Commission assessment of compliance with the net expenditure growth is based on exact figures. In
this Communication, the figures underpinning the assessment have been rounded to one decimal place for
presentation purposes.
*For Malta, the Commission recommends to the Council the abrogation of the decision establishing an
excessive deficit. ^ Columns (E) to (H) assume the activation of the national escape clause for defence
spending. § For Ireland, the Netherlands and Finland, the assessment of 2025 is carried out against Council
recommendations adopted in January 2025.
Source: Commission Spring 2026 Forecast and Commission calculations
50
Table 4 General government balance, debt and GDP growth
General government
balance (% GDP)
General government debt
(%GDP)
GDP
(real growth rate)
2025 2026 2027 2025 2026 2027 2025 2026 2027
Member States under the excessive deficit procedure
BE -5.2 -5.2 -5.4 107.9 110.5 112.8 1.0 0.7 0.9
FR -5.1 -5.1 -5.7 115.6 118.1 120.2 0.8 0.8 1.1
IT -3.1 -2.9 -2.9 137.1 138.5 139.2 0.5 0.5 0.6
HU -4.7 -6.2 -5.8 74.6 75.1 76.8 0.5 1.8 2.1
MT* -2.2 -2.2 -2.1 46.4 46.2 46.2 4.0 3.7 3.6
AT -4.2 -4.1 -4.1 81.5 83.4 84.9 0.6 0.6 0.9
PL -7.3 -6.5 -6.3 59.7 64.5 68.3 3.6 3.5 2.8
RO -7.9 -6.2 -5.8 59.3 61.6 63.4 0.7 0.1 2.3
SK -4.5 -4.6 -5.4 61.4 63.7 66.9 0.8 0.8 1.5
FI -3.4 -4.5 -4.6 88.5 91.2 93.1 0.2 0.8 1.4
Other Member States
BG -3.5 -4.1 -4.3 29.9 32.3 35.5 3.1 2.5 2.2
CZ -2.1 -2.8 -2.9 44.3 45.8 47.2 2.6 1.8 2.4
DK 2.9 0.9 0.5 27.9 27.0 26.2 2.9 1.9 1.8
DE -2.7 -3.7 -4.1 63.5 65.8 68.0 0.2 0.6 0.9
EE -2.0 -4.5 -4.8 24.1 26.9 30.5 0.6 1.6 1.7
IE 1.8 1.4 1.2 32.9 32.4 31.6 12.3 -1.2 3.4
EL 1.7 0.8 0.6 146.1 140.7 134.4 2.1 1.8 1.6
ES -2.4 -2.4 -2.0 100.7 99.6 98.9 2.8 2.4 1.9
HR -3.0 -2.9 -2.7 56.3 55.9 55.6 3.4 2.7 2.5
CY 3.4 2.1 2.5 55.0 50.4 45.5 3.8 2.3 2.7
LV -2.5 -3.3 -4.3 46.9 48.8 53.8 2.1 1.4 1.6
LT -1.8 -2.2 -2.7 39.5 44.6 48.4 2.9 3.0 2.1
LU -2.0 -1.2 -1.5 26.5 29.2 30.2 0.6 1.6 2.0
NL -1.6 -2.5 -1.9 44.4 46.9 47.0 1.8 1.0 1.1
PT 0.7 -0.1 -0.4 89.7 87.6 86.0 1.9 1.7 1.8
SI -2.5 -3.3 -3.5 65.7 64.9 65.1 1.1 1.9 2.3
SE -1.3 -2.8 -2.5 35.1 36.6 37.7 1.5 1.8 2.2
*For Malta, the Commission recommends to the Council the abrogation of the decision establishing an excessive deficit.
Source: Commission 2026 Spring Forecast
51
Box 5 - Methodological approach underpinning the assessment of compliance
A Member State is assessed (66) to be ‘compliant’ when the net expenditure (67) growth is within
the ceilings recommended by the Council. Where net expenditure growth is higher than
recommended (i.e. positive deviations), the Commission considers the size of the deviation in
relation to the thresholds of 0.3% of GDP in annual terms (see columns (A) and (B) in Table X1X)
and 0.6% of GDP in cumulative terms since the start of the plan (columns (C) and (D)). A positive
deviation below these thresholds entails an assessment of (risk of) non-compliance, while a
deviation above these thresholds entails an assessment of (risk of) material non-compliance (68).
In its assessment of compliance based on net expenditure growth, the Commission also takes into
account the overall budgetary position of a Member State, in particular whether it is close to
balance or in surplus.
In Spring 2026, for the first time after the entry into force of the reformed Economic Governance
framework, the fiscal assessment reflects the Commission’s calculation of the control account for
each Member State based on outturn data. The control accounts keep track of deviations from the
recommended maximum growth rates of net expenditure both in annual and cumulative terms
since the base year of the relevant Council recommendation for each Member State. They also
constitute the basis to monitor compliance with the Council recommendations under the excessive
deficit procedure.
For the Member States for which the national escape clause for defence spending has been
activated (column (E)), the assessment of compliance focusses on the comparison in cumulative
terms and includes a check whether any positive deviation from the recommended maximum
growth of net expenditure in cumulative terms is explained by a corresponding increase in defence
expenditure compared to a reference year (column (F)), up to 1.5% of GDP over the period 2025
to 2028. If the cumulated deviation can be explained by the increase in defence expenditure
compared to the reference year (columns (G) and (H)), the Member State is considered to be
compliant.
66 The Commission assessment of compliance with the net expenditure growth is based on exact figures from the control account.
In this Communication, the figures underpinning the assessment have been rounded to one decimal place for presentation purposes
(see Table 3). 67 For an analytical presentation of the net expenditure indicator and the control account, please see the Fiscal Statistical Tables,
which provide background data relevant for the assessment of the budgetary policies of the Member States, SWD(2026) 200 final,
Brussels 3.6.2026. 68 According to Regulation (EC) No 1467/97, if the general government debt of a Member State exceeds 60% of GDP, its fiscal
position is not ‘close to balance or in surplus’ and the deviation of the net expenditure growth from the recommended ceilings
exceeds 0.3% of GDP annually or 0.6% of GDP cumulatively, the Commission should prepare a report under Article 126(3) TFEU
for the assessment of the debt criterion.