EUROPEAN COMMISSION Brussels, 1.7.2021 SWD(2021) 184 final COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of Slovenia Accompanying the document Proposal for a COUNCIL IMPLEMENTING DECISION on the approval of the assessment of the recovery and resilience plan for Slovenia {COM(2021) 384 final}



Table of contents 1. Executive summary 2. Recovery and resilience challenges: scene-setter 2.1. Macroeconomic outlook and developments since the 2020 country report 2.2. Challenges related to sustainable growth, cohesion, resilience and policies for the next generation 2.3. Challenges related to the green and digital transition Green dimension Digital dimension 3. Objectives, structure and governance of the plan 3.1. Overall strategy of the plan 3.2. Implementation aspects of the plan 4. Summary of the assessment of the plan 4.1. Comprehensive and adequately balanced response to the economic and social situation 4.2. Link with country-specific recommendations and the European Semester 4.3. Growth potential, job creation, economic, institutional and social resilience, European Pillar of Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence 4.4. The principle of ‘do no significant harm’ 4.5. Green transition 4.6. Digital transition

4.7. Lasting impact of the plan 4.8. Milestones, targets, monitoring and implementation 4.9. Costing 4.10. Controls and audit 4.11. Coherence Annex - Climate and Digital tagging in the Recovery and Resilience Plan of Slovenia



1.Executive summary Slovenia’s economy was severely disrupted by the COVID-19 pandemic – with GDP declining by 5.5% in 2020. The economy is set to recover in 2021-22 aided by policy measures, investments and reforms financed by the recovery and resilience plan and a gradual lifting of restrictions. Losses in employment were limited, thanks to measures taken by the government to support jobs. Recovery signs are already visible as of the first quarter of 2021, and it is expected that growth will gain momentum over the remaining 2021 and into 2022. Public finances have also been severely affected, but higher levels of temporary discretionary spending helped to fend off a deeper decline in output and employment. The general government balance turned from surplus of 0.4% of GDP in 2019 to a deficit of 8.4% of GDP in 2020. In 2021, it is expected to reach 8.6% of GDP and to be below 3% of GDP only in 2024. Slovenia has requested EUR 1.78 billion of non-repayable financial support and EUR 705 million in loans under the Recovery and Resilience Facility. Together, this represents some 5.4% of GDP. Slovenia has also signalled that a further loan request may follow at a later stage. Slovenia’s recovery and resilience plan contributes to the economic and social recovery and the long-term development of the country. It addresses a significant subset of long-standing, structural challenges as identified in relevant country-specific recommendations addressed to Slovenia by the Council in 2019 and in 2020, notably in the areas of long-term care, healthcare, pensions and labour market, education and skills, research, development and innovation, green and digital transition, business environment and public procurement. The plan is also in line with the Draft Council Recommendations on the economic policy in the euro area. The plan is structured around four ‘clusters’: ‘Green transition’; ‘Digital transformation’; ‘Smart, sustainable and inclusive growth’; and ‘Health and welfare’. In the short and medium term, the plan will boost sustainable and digital investment across most sectors of the economy, from energy production to tourism, with the double objective of kick-starting the economy and supporting the twin transition. In the longer term, reforms targeting the public administration, the business environment, the labour market and the education system will increase productivity and competitiveness, thus strengthening Slovenia’s growth potential and job creation. Reforms will also strengthen Slovenia’s social safety net and ensure that the country is more resilient to future shocks. Overall, the plan constitutes a sufficient response to the economic and social situation in the country. Overall, the plan constitutes a comprehensive and adequately balanced response to the economic and social situation of Slovenia, across the six policy pillars referred to in Article 3 of the Recovery and Resilience Facility Regulation. Several reforms will strengthen economic and social resilience. These include an overhaul of the social security system (i.e. the healthcare, long-term care and pension systems) addressing demographic trends and challenges linked to a rapidly aging society. Structural reforms, especially in the labour market, are expected to raise labour market participation and promote longer working lives. These will, in turn, raise long-term growth and also address fiscal sustainability challenges. The envisaged modernisation of public administration and improvements in the business environment will also be instrumental in the recovery process, especially as the country aims to strengthen its competitive position in the region. The plan addresses coherently social challenges in line with the European Pillar of Social Rights, notably with its reforms and investments on healthcare, long-term care, active labour market policy and affordable housing. The plan also includes various policies for the next generation, notably on improving the quality of education, modernising schools, promoting the development of competences for the digital and green transition, supporting youth employment and addressing demographic trends to ensure greater intergenerational fairness. The plan has a strong focus on the green transition, with a dedicated cluster of five components, amounting to more than two-fifths of the plan’s total financial allocation. It includes key reforms to unlock the renewable energy potential and expand sustainable mobility, which are essential steps for decarbonising the energy and transport sectors. Investments in renewable energy sources, energy efficiency of public buildings, flood prevention, upgrading rail infrastructures, and dedicated measures on the circular economy will also facilitate the green transition in key sectors of the economy, including through reforms on green budgeting and public procurement criteria. Measures supporting climate change objectives account for 42.4% of the plan’s total allocation. The plan also indirectly supports biodiversity conservation with a key forestry reform and establishment of a seed, nursery and forest protection centre, by promoting nature-based solutions for climate change adaptation measures, and by prioritising wastewater investments with positive impacts on Natura 2000 sites. All measures in the Slovenian plan have passed the ex-ante assessment of the ‘do no significant harm’ principle. The plan is expected to significantly contribute to Slovenia’s digitalisation. This will include the introduction of new electronic identification documents for citizens and companies as well as investments in connectivity and digital skills to reduce the digital divide. The plan has a strong focus on the digitalisation of the public sector, in particular justice and e-health, and includes important measures to foster digital literacy in the education system. The plan incorporates a strong cross-border dimension, with a number of important multi-country projects on cloud, microelectronics, quantum communication and blockchain technology. Overall, measures with a digital impact account for 21.4% of the plan’s total allocation. The plan includes coherent and mutually-reinforcing actions and is expected to have lasting environmental and socio-economic impacts. The plan’s major structural reforms, in particular those of the social security system, along with the important investments in the twin transition (e.g. flood protection and digitalisation of the public administration) are expected to have positive long-term effects. If properly implemented, the plan should prepare the country to face key structural challenges, notably on demographic change, climate mitigation and adaptation, and fiscal sustainability. The measures included in the plan cover all seven European flagship areas, with a particular focus on Power Up, Recharge and Refuel, Modernise, and Reskill and Upskill. Slovenia has designed a robust legal and organisational framework underpinning the implementation of the plan. This includes the establishment of the Office for the Implementation of the recovery and resilience plan as the Coordinating Authority, the adoption of a National Decree and Guidelines of the Coordinating Authority and other entities. Pending legislative actions in this area will be completed prior to the first instalment. The milestones and targets of the Slovenian plan constitute an appropriate system for monitoring the plan’s implementation. Slovenia has provided clear and sufficient information and evidence on costs. Although Slovenia has not provided a validation of the cost estimates by an independent public body, the estimated total costs of the plan seem reasonable, plausible and proportionate. The total costs of the plan do not include elements that would be covered by existing or planned Union financing. The overall strategy and the measures contained in the plan are coherent. Each cluster is built around components containing consistent packages of mutually-reinforcing reforms and investments, pursuing complementary aims. For example, investments to promote the use of new technologies in the public administration are complemented by reforms to promote e-services and improve the digital skills of staff. These are closely linked to investments in digital education and skills, and investments in the digitalisation across a variety of economic sectors, including smart energy grids, rail and road infrastructures. The measures’ objectives are also well embedded in European and national initiatives and complement particularly regional and cohesion policies. Chart 1: Assessment scheme

(1)

Balanced Response (2)

CSRs* (3)

Growth, jobs… (4)

DNSH** (5)

Green target (6)

Digital target (7)

Lasting impact (8)

M&T*** (9)

Costing (10)

Control systems (11)

Coherence A A A A A A A A B A A * CSR: country-specific recommendations; ** DNSH: Do no significant harm; *** M&T: milestones and targets. 2.Recovery and resilience challenges: scene-setter 2.1.Macroeconomic outlook and developments since the 2020 country report Slovenia’s economy was severely disrupted by the COVID-19 pandemic, with GDP declining by 5.5% in 2020, but prompt policy actions helped to minimise its impact in particular on employment. Aggregate demand declined by 7.6% with private consumption and investment in machinery most severely affected, falling by 9.7% 11.1% respectively. Overall, imports declined faster than exports, and the growth contribution from net exports was positive. The economy appears to have started its recovery in the first quarter of 2021 and according to the Commission 2021 spring forecast, the economy is now projected to grow by 4.9% in 2021 and by 5.1% in 2022. The labour market remained quite resilient considering the unfavourable economic environment, benefiting from substantial government support. The unemployment rate increased modestly from an annual average of 4.5% in 2019 to 5.0% in 2020. Based on the Commission 2021 spring forecast, employment is expected to substantially recuperate the losses incurred in 2020, although hours worked will adjust more quickly than employment and the recovery in service sectors is likely to be slower. The unemployment rate is projected to remain at 5% in 2021 before falling to 4.8% in 2022. Inflation continues to remain contained, but has accelerated to 2.2% in May 2021 and wages are projected to also grow more moderately. While the data for 2020 is not yet available, it can be expected that the impact of the crisis on Slovenia’s social conditions was also limited thanks to timely policy intervention. Slovenia is a relatively equal society, income distribution is among the most equal in the EU and the ratio of minimum wage to average wage is among the highest in the EU. The share of people at risk of poverty or social exclusion (14.4% in 2019) was significantly below the EU average (20.9% in 2019). However, poverty among elderly people, especially among women, is still a concern. In 2019, the at-risk-of poverty or social-exclusion (AROPE) rate for the age group 65+ was higher than the EU average (20.5% compared to EU average of 18.4%). The AROPE rate was also significantly lower in West Slovenia (11.5%) than in the East Slovenia (17.0%). Fiscal policy provided extensive support to businesses and households during the COVID-19 crisis. The general government balance turned from surplus of 0.4% of GDP in 2019 to a deficit of 8.4% of GDP in 2020. The annual change in the primary budget balance amounted to -8.9% of GDP, including discretionary budgetary measures aimed at mitigating the consequences of the pandemic of 5.2% of GDP. In 2021, the budget deficit is expected to reach 8.6% of GDP and is only expected to fall below 3% of GDP in 2024. Discretionary policy measures in response to the COVID-19 pandemic are forecast to amount to 2.6% of GDP in 2021. These measures include, among others, (i) wage compensations for employees staying at home, (ii) a monthly basic income for self-employed workers and farmers, (iii) wage supplements for special working conditions for public sector employees, and (iv) coverage of companies’ fixed costs. Most of the COVID-19-related measures are expected to be phased out by the end of 2022. Whilst Slovenia’s public debt was on a declining path prior to the COVID-19 crisis, the debt-to-GDP ratio increased from 65.6% in 2019 to 80.8% in 2020. With the expected economic rebound, the public debt-to-GDP ratio is set to decrease already in 2021, but it will take years for it to reach its pre-pandemic level. Fiscal sustainability risks are low in the short term, but continued monitoring is warranted. Based on the Commission’s S0 indicator, which is presently below its critical threshold, risks appear contained. Financial market data show stable spreads of credit defaults swaps and a gradually improving credit rating, prior to and during the crisis. However, if the recovery is delayed and/or crisis-related spending turns out to be permanent or revenues fall short of the forecast, risks to fiscal sustainability will intensify. Over the medium term, fiscal sustainability risks are deemed to be medium, given the significant level of debt and sensitivity to macroeconomic shocks. Under the baseline scenario, the government debt level is expected to reach its peak in 2025 and fall afterwards to 70.8% of GDP in 2031. Moreover, the debt trajectory is sensitive to macroeconomic shocks, with a significant probability of the debt ratio to be higher in 2025 than in 2020, according to a stochastic extension of the baseline projection. The S1 indicator confirms the medium-risk category. Contingent liability risks remain in the banking sector. Although the ratio of non-performing loans was on the declining path before the crisis, it still remained above the critical threshold. The debt sustainability risks are also aggravated by a high share of government debt held by non-residents. However, the increase in the average residual maturity has reduced the short-term rollover risks linked to significant levels of government debt. The implementation of reforms and investments under the Next Generation EU, notably the Recovery and Resilience Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in the coming years, which, ceteris paribus, should contribute to strengthening debt sustainability. Driven by rising age-related expenditure, fiscal sustainability risks are deemed to be high in the long term. The S2 indicator indicates high risk over the long-term due to the projected increase of ageing costs. This is in particular driven by future public pension spending developments, with a projected increase from 10% of GDP in 2019 to 16.1% of GDP in 2057, according to the latest 2021 Ageing Report. This represents the second highest increase in the EU. The crisis has also impacted macroeconomic imbalances which warrant close monitoring. Specifically, the 2021 Alert Mechanism Report highlighted risks related to the housing market and government debt in Slovenia. Real house prices grew by 5.3% in 2020, below but close to the MIP scoreboard threshold of 6%. Private sector debt increased in 2020, mostly due to the decline in GDP, since net credit flows remained subdued despite generous breaks to loan repayments mandated by the government. Still, the private debt ratio to GDP in Slovenia remains below the MIP scoreboard threshold. Government debt increased strongly in 2020, reaching 80.8% of GDP, due to decline in economic activity and policy response to the crisis. The current account surplus, already high before the crisis, widened further – on the back of falling investment and consumption – while the net international investment position worsened slightly. Nominal unit labour costs growth increased further in 2020, bringing the 3-year percentage change to 14.8%, significantly above the MIP scoreboard threshold of 9%. The macroeconomic scenario underpinning the plan is plausible and consistent with the European Commission’s 2021 spring forecast. The scenario embedded in the Plan foresees a rebound of economic growth in 2021 following the COVID-19 induced contraction in 2020. Real GDP is set to increase by 4.6% in 2021. According to the recovery and resilience plan’s scenario, growth will remain robust reaching 4.4% in 2022 before easing somewhat to 3.3% in 2023. Real GDP growth is expected to be driven by a recovery in private consumption, investment and a continued positive contribution from net trade. Inflation is set to remain contained below 2% until 2024. The European Commission 2021 spring forecast foresees real GDP in Slovenia to grow at 4.9% and 5.1% in 2021 and 2022, respectively. Similar to the Slovenian authorities, the Commission considers domestic demand as the main growth engine behind the recovery. The Commission expects a weaker rebound of investment in 2021 but a catching up by 2022. For net exports, both the Commission and the Slovenian authorities forecast a positive contribution to growth in 2021 and 2022. Labour market projections and inflation projections are also very similar. For the general government deficit and debt, the Commission forecasts more favourable developments in line with a slightly more positive macroeconomic scenario. There are, however, significant risks that some crisis-related spending turns out to be permanent or revenues fall short of the forecast, risking a deterioration of the fiscal outlook in 2022 and fiscal sustainability in the longer term. The period beyond 2022 is currently not covered by the Commission forecast. The macroeconomic and fiscal outlook continue to be affected by high uncertainty related to the COVID-19 pandemic and its economic consequences. 2019 2020 2021 2022 2023 2024 2025 2026 COM COM RRP COM RRP COM RRP RRP RRP RRP RRP Real GDP (% change) 3.2 -5.5 -5.5 4.9 4.6 5.1 4.4 3.3 3.0 2.5 2.5 Employment (% change) 2.5 -1.0 -1.0 0.9 0.8 2.0 1.5 1.5 1.2 0.9 0.8 Unemployment rate (%) 4.5 5.0 5.0 5.0 5.0 4.8 4.8 4.5 4.2 4.0 3.9 HICP inflation (% change) 1.7 -0.3 -0.3 0.8 0.8 1.7 1.2 1.7 2.1 2.0 1.9 General government balance (% of GDP) 0.4 -8.4 -8.4 -8.5 -8.6 -4.7 -5.7 -3.8 -2.8 n.a n.a Gross debt ratio (% of GDP) 65.6 80.8 80.8 79.0 80.4 76.7 79.6 79.0 78.0 n.a n.a Source: Commission Spring Forecast 2021 (COM); Recovery and resilience plan (RRP), Stability Programme 2021 2.2.Challenges related to sustainable growth, cohesion, resilience and policies for the next generation Smart, sustainable and inclusive growth Low investment rates weigh on Slovenia’s economic potential and productivity growth. Before the COVID-19 crisis, labour productivity growth was resuming after a period of rather limited convergence to the EU average. This was driven largely by efficiency gains, as past structural reforms started to pay off. However, investment remained below historical and EU averages, chocking off a more rapid catching up: in 2019 investment was almost 3 percentage points below the EU average (19.6% compared to 22.5%). During the crisis in 2020, total investment declined by 4.1%, less than the fall in GDP (5.5%). However, the fall in equipment investment was more significant at 11.1%.

Access to finance, especially for many SMEs, remains a challenge. Thanks to public support measures since the outbreak of the COVID-19 liquidity and financing continued to support private sector firms. However, financing is still heavily skewed towards loans and dependent on banks. To make the financial market more resilient and to provide both investors and companies seeking finance with better access to equity, the equity market should play a greater role in Slovenia. This is especially the case as an important share of job creation is attributed to start-ups and young firms, in line with the EU average. The regulatory burden in Slovenia has been gradually decreasing but remains relatively high in some areas. Between 2010 and 2019, Slovenia’s position in the World Bank’s ease-of-doing-business index ranking (World Bank, 2020) improved from 53rd to 37th place. Slovenia has been implementing measures to enhance professionalization and strengthen remedy procedures in public procurement. However, the level of competition in public procurement still remains unsatisfactory. The research and innovation potential of the economy is hampered by rather low public and private investment. Overall, R&D intensity has declined between 2010-2019, whilst the country’s scientific and technological performance remains modest. The translation of research results into innovation remains hampered by the low level of academia-business cooperation and low research and development digital capacities among firms, notably domestic SMEs. Between 2012 and 2019, Slovenia witnessed the greatest decline in the EU in its innovation performance (9.9%-point), in sharp contrast to the EU performance change, which improved by 8.9%-point during the same period. The market capitalisation of Slovenia’s national stock exchange is low and equity and venture capital markets are still not sufficiently developed. This may stifle market entry and growth of innovative and high potential firms. Social and territorial cohesion Slovenia performs well on social indicators, with the notable exception of the low activity and employment rates of older workers. Before the COVID-19 crisis, unemployment was contained to an all-time low (4.5%), the activity rate was improving, while the risk of poverty and social exclusion were decreasing from over 14% in 2013 to 12% in 2019. However, the inactivity rate of 55-64 year olds remained significantly above the EU average as was their unemployment rate, particularly the long-term unemployment rate. The COVID-19 crisis has negatively affected the social cohesion in Slovenia. The labour market participation has deteriorated significantly for some groups, in particular among young people, as well as women. Youth unemployment (8.1% in 2019) reached 14.2% in 2020. The number of young people with lower education (primary or lower) who in 2020 registered at Public Employment Service increased by 34.7% compared to the previous year. Unemployment among women increased from 4.9% in 2019 to 5.5% in 2020. Regional and sub-regional disparities in Slovenia persist and despite the accelerated economic growth after 2014, they had remained broadly stable until 2019. Eastern Slovenia lags behind Western Slovenia (which includes the capital) in GDP per capita (71% and 103% of the EU average in 2017 respectively). The disparities are pronounced at sub-regional (local) level. In particular, the role of the capital sub-region around Ljubljana in the economy is predominant: its GDP per capita in 2017 (120% of the EU average) was almost three times higher than in Slovenia’s poorest region (Zasavska, 45% of the EU average). Health, economic and social/institutional resilience Slovenia’s pension system faces both sustainability and adequacy challenges. Pension expenditure is expected to increase from 10.0% in 2016 to 16.0% of GDP in 2070, which represents the second highest increase in the EU. If unchecked, this increase will exert significant pressure on public finances in the long term and a burden for younger generations. The use of long-term unemployment and long-term sick-leave schemes as bridges to early retirement put further pressure on the system. At the same time, the Slovenian pension system produces relatively low aggregate replacement ratios and low median relative incomes of people aged 65+. The incomplete or short working careers of a large part of the current working-age population may imply that their pensions may not be able to ensure an income above the poverty line after retirement. Significant structural weaknesses remain in the health sector. The COVID-19 pandemic has exposed the structural weaknesses of the healthcare system revealing limited resilience in terms of resources, staff and ability to respond to the sudden increases of specific care demand. The level of unmet needs and long waiting times are long-standing issues, which have been aggravated with the temporary restrictions imposed during the current COVID-19 crisis. This is linked to the reduced availability and increased workload of primary-healthcare staff. The first wave of the COVID-19 pandemic (April-May 2020) has forced healthcare services to immediately put on hold routine preventive care, outpatient visits, dental services etc. The following waves of the COVID-19 pandemic forced the Ministry of Health to put again on hold all non-essential outpatient medical check-ups and planned surgery. Overall, there are shortages in the health workforce, especially family doctors (GPs), but also high turn-over rates in nursing, which hinder access to health services. Public spending for health remains below the EU average and the financing of the health system is strongly cyclical. In the long run, it will be difficult to cover the increasing health costs with the decreasing active and rapidly ageing population having a growing disease burden of chronic conditions. Important investments are needed to: i) modernise equipment and upgrade obsolete medical infrastructure in pace with sector development and hospital facilities and ii) ensure a better deployment, use and financial coverage of e-Health tools (telemedicine), an important factor enabling the health system to work in times of pressure. The long-term care system lacks a coherent regulatory framework. Regulation of the system for various groups of recipients and for various long-term care benefits is scattered across different legislative acts and several social care providers are involved in this policy field. The COVID-19 pandemic exposed deep-rooted problems in the long-term care system, including in particular in terms of staffing and inadequate facilities. Significant structural efforts and investment are necessary for setting up the system of quality long-term care services, including social and health services, and infrastructural upgrades. New care models, focussing on prevention and integration of health and social services and a better mix between institutional and community care for all age groups in line with the deinstitutionalisation principle, are crucial as the population is ageing and chronic conditions will be even more prevalent in the future. Policies for the next generation, children and youth, including education and skills The education system is performing relatively well at all levels, but there are gaps for certain groups. Slovenia’s early-school-leaving rate of 4.6% (2019) is significantly below the EU average (10.2%). Slovenian pupils perform well in terms of basic skills, but there are large gaps in reading skills between genders and between native-born pupils and those with migrant background. The educational achievement differs based on socio-economic background. Participation in early childhood education and care is growing and close to EU average, but is low among children from migrant and low socioeconomic backgrounds. The percentage of people aged 30-34 with tertiary qualifications in 2019 was 44.9%, above the EU average of 40.3%, but with the second largest gender gap in the EU (women 57.1%; men 34.5%). The response of the education system to the COVID-19 pandemic was quick, however the crisis demonstrated the importance of stepping up the readiness for on-line learning and addressing the digital divides. This requires adequate digital infrastructure and education materials, teachers with the necessary skills and additional support for students in rural areas, with low socio-economic background, with migrant background, or with disabilities. Slovene schools are better equipped digitally than the EU average, but the connectivity in remote areas and access to devices have presented a challenge. The crisis showed that the teachers’ digital competences need significant improvement to be able to fully exploit digital technologies for teaching. Moreover, learning of digital skills should become much more integrated in the curricula throughout the education system. There is a risk that the crisis may affect vulnerable learners most, especially those from lower socio-economic backgrounds, those with special educational needs and those in rural or remote areas. This might lead to an increasing digital divide. Knowledge and skills of both the employed and job seekers are insufficiently adjusted to the current and future needs of the economy. This is a result of slowly adapting educational programmes as well as a lack of an appropriate system for forecasting future skill needs and a consequentially slow adaptation of the skills of workers. By autumn 2020, one third of the young unemployed had completed secondary school and a little less than a third had completed primary school or less. In order to improve employment opportunities, the Employment Service implements various active employment policy programs. However, in the first ten months of 2020, 5 551 young people were included in active labour market policies (ALMP) programs, 9.8% less than in the same period in 2019. 2.3.Challenges related to the green and digital transition Green dimension The recovery and resilience plan should contribute to the green transition and at least 37% of the financial allocation needs to contribute to climate objectives. The measures in the plan shall contribute to achieving the 2050 climate neutrality objective, and the 2030 energy and climate targets, taking into account Member States’ national energy and climate plans. They should also contribute to meeting environmental targets for waste, water, pollution control, sustainable mobility, biodiversity protection and restoration, marine and water resources, and support the transition to sustainable food systems as well as to a circular economy as appropriate, while ensuring that nobody is left behind. Climate and energy policies Slovenia’s economy is carbon intensive and the pace of emission reduction is slow. Greenhouse gas emissions intensity of energy consumption remains above the EU average (with an indicator of 89.8 in 2019 compared to 82.8 at EU level) and its rate of reduction since 1990 is below the EU average. The gap in greenhouse gas emissions productivity has narrowed in recent years. However, this has been mainly due to one-off and external factors (e.g. closure of a thermal power plant and reduced heating in milder winters). This means that the country might fall behind its own 2030 development strategy goals.

The Europe 2020 target for renewables will most likely not be reached with current policies. The latest assessment of progress towards the 2020 renewable targets showed that Slovenia is falling behind the planned progress for 2017-2018 and 2019 data confirms this trend. In addition, the national contribution to the EU 2030 renewable energy target specified in Slovenia’s National Energy and Climate Plan (NECP) is unambitious (27% of gross final energy consumption by 2030), as it implies only a 2 percentage points increase in comparison to the 2020 goals while further energy efficiency measures kick in. The Slovenian NECP describes difficulties in increasing its share of renewable energy power generation because of environmental considerations – almost 40% of its territory is designated under Natura 2000 – and the opposition of local communities and environmental organisations to certain projects. The Commission assessment of the Slovenian NECP recommended removing administrative barriers and improving the regulatory framework. The existing energy storage is underdeveloped and insufficient to address the needs of local renewables production. Slovenia’s economy is more energy intensive than the EU average. Primary energy intensity Energy consumption of Slovenia is above the EU average (144 toe/MEuro2015 compared to 102 toe/MEuro2015 in 2019) and was increasing before COVID-19, putting the achievement of the EU 2020 energy efficiency target at the deadline under pressure. The high dependency on road transport and cars and the low use of public transport contribute greatly to Slovenia’s carbon emissions. Transport emissions are responsible for 42.7% of the total Slovenian CO2 emissions, which is well above the EU average (32.6%), and they continue to rise in absolute terms. Sustainable transport connections, in particular rail, are not sufficiently developed to fully support a carbon-friendly modal shift or the economic development of less‑developed regions. The use of public transport is very low by international standards. The public transport options are outdated and limited, including on intermodal connections. Public transport was also severely affected during the COVID-19 pandemic; the use of public transport services fell by 65% per passenger-kilometre and faced a 75% fall in passenger numbers. The country is exposed to climate change-related damages. Major changes in climate variables are being witnessed, which are above average in Slovenia. The increase in air temperature is most pronounced, changes in rainfall are significant and extreme weather events are higher. A significant share of the population lives in areas exposed to floods, which is one of the costliest natural disasters in Europe. Slovenia identified a significant number of areas exposed to the risk of floods, with a high risk of damage to health, economy and environment. In mountain regions, the risk of avalanches is increasing. Precipitation will take the form of strong rainfall and winter precipitation is expected to increase strongly. With a small amount of snow, the risk of large-scale flooding will increase significantly in winter. Drought periods will be extended in summer and short-term rainfalls will increase. The climate change scenarios up to 2050 show that Slovenia’s air temperature will continue to rise. Slovenia will experience more frequent droughts and the length and intensity of heat waves will increase. Air quality in Slovenia continues to be a cause for concern. As energy production and heat generation from solid fuels are among the main contributing factors to air pollution, it is important to further diminish emissions in these areas and to increase efficient and clean district heating. Performance on circular economy is mixed. Slovenia has a sound waste management system overall, with advanced rates of separate collection and a high recycling rate. At the same time, Slovenia’s low material productivity and high-energy intensity are improving but still below the EU average. The quality of water has improved, but Slovenia faces difficulties with urban wastewater and water losses in distribution networks. Supported by EU funds, Slovenia has invested significantly in wastewater treatment, as well as in drinking water systems. However, it still does not comply with the Urban Waste Water Directive and water supply losses (29%) remain above the EU average (23%). Such leakages are a waste of surface and ground water, and they result in higher energy use for water treatment and distribution purposes. They also bring increased risks of water contamination. Slovenia makes no use of green budgeting practices. While the overall level of environmental taxation is above the EU average, there may also be scope to improve its use to better support the policy objectives and to ensure a just transition. The table below gives an overview of Slovenia’s objectives, targets and contributions under Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action. National targets and contributions Latest available data 2020 2030 Assessment of 2030 ambition level Binding target for greenhouse gas emissions compared to 2005 under the Effort Sharing Regulation (%) -7% / -9% (2019) 4% -15% More ambitious national target of -20% National target/contribution for renewable energy: Share of energy from renewable sources in gross final consumption of energy (%) 21.1% in 2018 25% 27% Unambitious (37% is the result of RES formula) National contribution for energy efficiency: Primary energy consumption (Mtoe) 6.81 / 6.52 (2019) 7.1 6.4 Modest Final energy consumption (Mtoe) 4.975 / 4.8 (2019) 5.1 4.7 Low Level of electricity interconnectivity (%) 83.6% No specific target No specific Target N.A. Source: Assessment of the final national energy and climate plan of Slovenia, SWD (2020) 923 final, with indicated updates for 2019 data. Digital dimension The recovery and resilience plan should contribute to the digital transition and at least 20% of the financial allocation needs to contribute to digital objectives. The measures in the plan should, inter alia, contribute to the digital transformation of the economic and social sectors (including public administration, public services, and the justice and health systems). The objective of the measures in the plan should be to improve not only the competitiveness, but also the resilience, agility and security of companies and public actors, all while ensuring inclusiveness. The adoption of digital technologies is generally well advanced, but some sectors are lagging behind. Slovenia ranks 16th among EU Member States in the 2020 European Commission Digital Economy and Society index (DESI). In particular, Slovenia needs to improve the up-take of the 100 Mbps fixed broadband, while addressing the remaining urban-rural divides, and mobile broadband. In addition, the deployment of 5G, including swift assignment of spectrum, remains a challenge. The Slovenian market would benefit from greater collaboration between all public stakeholders and the industry, especially in establishing the appropriate regulatory environment necessary to boost private investment and competition, and in adopting the radio spectrum management strategy. There is growing awareness on the need to integrate digital technology in business models. Some 75% of Slovenian firms have implemented - either fully or partially - at least one digital technology. This is more than the EU average of 58% (EIB, 2019). At the same time, the degree of integration varies considerably across different sectors of the economy. There is a higher degree of digitalisation in services than in manufacturing. The digital transformation is strong in the e-commerce, tourism, automotive sector, innovation of composite materials and companies integrated into foreign value chains. Furthermore, some niche areas such as robotics, fin-tech, cyber security and artificial intelligence, are very well developed. Lower than expected up-take of digital public services might be linked to trust, security and low interoperability issues. A common national electronic identifier is missing, access to several open databases and services is not secure and user friendly. Slovenia needs to accelerate the introduction and rollout of secure, unique and user-friendly solutions such as e-identifiers or e-signatures, which are expected to boost the reception of digital public services, increase trust in online transactions and ensure mobile and cross-border access to public services. It is also necessary to increase interoperability across big systems (tax authority, land cadastre, company register, etc.) which all are designed as closed systems, operating with access codes different from the general digital public services platform e-VEM. Basic digital skill levels are slightly below the EU average and the digital divide is significant. According to DESI 2020, 55% of people aged 16 to 74 years have at least basic digital skills (56% in the EU as a whole). A major source of concern is the low level of inclusion of digital skills in the curricula of primary and secondary schools and lack of obligatory ICT training for teachers. Improving digital skills would allow a broader use of teleworking and digital services, a better match of digital skills with the requirements of the labour market, as well as inclusion of vulnerable groups such as elderly or people living in rural areas. Marginalized and disadvantaged groups in rural areas (e.g. Roma), older low skilled unemployed, citizens at risk of poverty, persons with foreign background and elderly are not sufficiently included in the digital economy and society. The Slovenian telecoms market is overall competitive, with a strong presence of the state. There are four operators in a market of two million inhabitants. The Republic of Slovenia owns directly 62.54% share of Telekom Slovenije Group to which the incumbent Telekom Slovenije belongs to. Adding indirect control through state owned funds (SDH and Kapitalski sklad), the control stake increases to 72.38%. In 2019, Telekom Slovenije’s market shares were: 31% in fixed broadband access (-2.0 percentage points compared to 2018), 34.8% in Voice over Internet Protocol (VoIP) telephony - retail (-1.3 percentage points), 37.1% in IP TV (-3.2 percentage points) and 39.9% in the mobile telephony retail market (-2.7 percentage points). Telekom Slovenije continued to slowly lose market shares over the last two years. Since then, the multiband auction took place in April 2021 and frequencies were acquired by A1 Slovenije, T-2, Telekom Slovenije and Telemach. Radio frequency bands 700 MHz FDD, 700 MHz SDL, 1500 MHz SDL, 3600 MHz and 26 GHz will be available after issuing the licences by mid-2021.

Graph 1: Relative performance of Slovenia compared to EU average for the five DESI 2020 dimensions Slovenia’s ranking in the Digital Economy and Society Index 2020. https://ec.europa.eu/digital-single-market/en/scoreboard/slovenia Note: EU aggregate corresponds to EU28, based on 2020 DESI report. Box 1: Progress towards the Sustainable Development Goals The objectives of the Sustainable Development Goals are integrated in the European Semester since the 2020 cycle. This provides a strong commitment towards sustainability in coordination of economic and employment policies in the EU. In that respect, this section outlines Slovenia’s performance with respect to SDGs with particular relevance for the four dimensions underpinning the 2021 Annual Sustainable Growth Strategy and of relevance to the recovery and resilience plans (green transition, fairness, digital transition and productivity, and macroeconomic stability), indicating possible areas where investments and reforms in line with the objectives of the Facility could further accelerate the progress on the SDGs. Green Transition The performance on SDGs related to the green transition is mixed. On climate action (SDG 13), Slovenia is well above the EU average on greenhouse gas emissions in 2018, with an index of 94.4 vs 79.3 for the EU. The share of renewable energy in gross final consumption (22% in 2019) is above the EU average (19.7% in 2019) but below the objectives (25% by 2020). On circular economy (SDG 12) Slovenia is making progress with an increase in the circular material use rate (from 8.4% in 2014 to 10.4% in 2019), which is however still below the EU average (11.9% in 2019). Similarly, the air emission intensity from industry is improving (from 0.16 grams per euro in 2013 to 0.14 in 2018) but is still above EU average (0.08 in 2018). On biodiversity (SDG 15), Slovenia is the Member State with the highest percentage of Natura 2000 areas in 2019 (38%). Fairness Slovenia performs well on most SDG indicators related to fairness. On risk of poverty, social exclusion or material deprivation (SDG 1) Slovenia is following a downward trend and performs better than the EU average except on the indicators concerning the percentage of population living in households with poor housing conditions (20.6% vs. 12.7% at the EU level in 2019). The performance is mixed on good health and well-being (SDG 3) where Slovenia is progressing on some indicators (healthy years at birth; perceived good health status; number of deaths due to accident at work or car accidents). However some indicators like smoking, obesity rate and exposure to air pollution are still above the EU average. Moreover, the access to medical care has considerably deteriorated, as self-reported unmet need for medical care increased in the period 2014-2019 from 0.2% to 2.9%. On quality education (SDG 4) Slovenia outperforms on basic and tertiary education. However, there is still a gap in education outcomes between men and women and a significant one between native and foreign born pupils. Slovenia lags behind the EU average on the participation of adults in adult learning– this indicator was at 11.9% in 2015 and has fallen to 8.4% in 2020. On gender equality (SDG 5) Slovenia is performing much better compared to the EU average on the gender employment gap, pay gap and gender gap in inactive population due to caring responsibilities. It is however not catching up with the trends at the EU level on gender equality in leadership positions. On inequalities within the country (SDG 10) the risk of poverty or social exclusion between urban and rural areas has increased which is contrary to the trends at the EU level. Digital transition and productivity As regards Industry, innovation, and infrastructure (SDG 9), Slovenia performs below the EU average on the gross domestic expenditures on R&D ranking, with 2.04% in 2019 compared to the EU average of 2.20%. The expenditure share was falling between 2013 and 2017 but turned upwards again in 2018. Share of research personnel in Slovenia is higher than in EU in general, so the potential to use more research resources appears to be available. The scientific and technological performance of the country (measured by the 10% top-cited publications) and academia-business cooperation (measured by public-private scientific publications) remains modest (ranked 17th in the EU in 2017 and 16th in 2019). The country is lagging behind in patent applications, with only 79 per million inhabitants sent to the European Patent Office in 2020, compared to an average of 147 at EU level. On digital skills (SDG 4), in 2019 Slovenia performed slightly below the EU average in terms of adults with at least basic digital skills. Macroeconomic stability On decent work and economic growth (SDG 8), Slovenia still faces challenges. While the GDP per capita has increased rapidly since 2015, reaching 74% of EU average by 2020, the gap with the EU average has remained rather constant over the years. Investment share of GDP has been lower than the EU average since 2010. This indicator reached its low point in 2016 and has been improving since then, but in 2019 it was still almost 3 percentage points below the EU average (19.6% compared to 22.5%). On the more positive side, Slovenian labour market indicators are better than the EU average. Employment rate has been improving rapidly and reached 75.6% in 2020, clearly above the EU average of 72.4%. The share of young people neither in employment nor in education and training has been consistently lower in Slovenia than the EU average. Also, the long-term unemployment rate and in-work poverty rate are low. Regarding the institutional framework (SDG 16), Slovenians perceive the independence of the justice system more negatively than EU citizens on average. Corruption perception index shows that the perceived corruption level is lower compared to countries in similar socioeconomic situation. 3.Objectives, structure and governance of the plan 3.1.Overall strategy of the plan The plan aims to support Slovenia’s socio-economic recovery and long-term development following the standstill caused by the COVID-19 pandemic. It also aims to address the long-standing challenges facing the economy identified in the Slovenian Development Strategy 2030, in particular the slow response to technological and demographic changes, and climate change. Such challenges are reflected in the structure of the plan and its four ‘development area’ clusters: green transition; digital transition; smart, sustainable, and inclusive growth; and health and welfare. These four clusters consist of 16 components in total.

The green transition cluster includes key reforms to unlock renewable energy potential and sustainable mobility, which are essential steps to decarbonise the energy and transport sector (e.g. amendments to the renewable energy sources and electricity supply acts, new national regulatory framework in the field of alternative fuels in transport). Investments in renewables, energy efficiency of public buildings, environment, upgrading rail infrastructures, deployment of recharging and refuelling infrastructure for alternative fuels in road transport, and dedicated measures on the circular economy are also expected to enable the green transition in key sectors of the economy. With more than 40% of the total allocated budget, this cluster is by far the biggest in terms of estimated costs. The digital transformation cluster covers a strategy for digital transformation and reforms on electronic identification that will increase use of public e-services and digitalisation of companies. These are accompanied by an important reform to boost cybersecurity across all sectors. Investments in connectivity and digital skills are expected to reduce the digital divide, and key public sector segments (e.g. justice and health) are also expected to be digitalised. The cluster comprises four multi-country projects (cloud, microelectronics, quantum communication and blockchain). In financial terms, this covers 13% of the total allocation but it is important to note that several additional digital investments are included in other clusters (e.g. digital skills in the component on education). The smart, sustainable and inclusive growth cluster includes important reforms of the labour market. These will address the long-term sustainability and adequacy of the pension system notably by limiting early retirement and other forms of early exit from the labour market and introducing other reforms in the system. Importantly, it will also increase the employability of low-skilled and older workers through training provision and more targeted active labour market policies. Legislation on a short-time work scheme should allow the labour market to deal with major shocks in times of crisis. Mutually-reinforcing reforms and investments in research and innovation, productivity of companies, tourism and culture, and educational infrastructure and curricula will also contribute to higher productivity and advancing the twin transition. Targeted reforms of public institutions will also reduce administrative barriers and further improve public procurement. This is the second biggest cluster, representing some 30% of the plan’s financial allocation. Finally, the health and welfare cluster includes long-awaited flagship reforms of the healthcare and long-term care system. These will ensure the provision of high-quality services, including for both healthcare and social care, while ensuring fiscal sustainability. The long-term care act, the first comprehensive legislation in this area in Slovenia, has been under discussion for more than a decade. After the adoption by the Government on 17 June 2021, the long-term act entered the parliamentary procedure. Together with the pension reform and healthcare reform, the long-term care system is expected to make social security in Slovenia much more effective, accessible and sufficient for citizens’ needs. Investments in related infrastructure, skills, and in affordable housing are expected to also mitigate the social impact of the crisis on marginalised people. This cluster represents some 15% of the plan’s estimated costs. Component Costs

(EUR million) Green transition 1064.75 C1 K1: Renewable energy and energy efficiency 146.00 C1 K2: Sustainable renovation of buildings 86.05 C1 K3: A clean and safe environment 472.80 C1 K4: Sustainable mobility 311.90 C1 K5: Circular economy – resource efficiency 48.00 Digital transformation 316.67 C2 K1: Digital transformation of the economy 56.50 C2 K2: Digital transformation of the public sector and public administration 260.17 Smart, sustainable, and inclusive growth 737.36 C3 K1: Research, development and innovation 132.22 C3 K2: Raising productivity, a business-friendly environment for investors 157.50 C3 K3: Labour market – measures to reduce the impact of negative structural trends 56.28 C3 K4: Restructuring of Slovenian tourism and investment in infrastructure in the field of tourism and cultural heritage 127.00 C3 K5: Strengthening competences, in particular digital competences and those required by the professions of the future and the green transition 264.36 C3 K6: Efficient public institutions 0.00 Health and welfare 363.90 C4 K1: Health 224.90 C4 K2: Social security and long-term care 79.00 C4 K3: Housing 60.00 Total: 2482.69 3.2.Implementation aspects of the plan Slovenia’s recovery and resilience plan is consistent with other European and national programmes. In particular, the plan is consistent with the National Energy and Climate Plan, by including measures to support green transition (e.g. building renovation and energy-efficient construction, deployment of renewables, sustainable transport). It also aims to complement the Just Transition Plans for coal regions identified as eligible under the Just Transition Fund, currently under discussion. Similarly, it complements the implementation of the Youth Guarantee with measures aimed at accelerating the entry of young people into the labour market and strengthening cooperation between the education system and the labour market. The plan is expected to also increase the productivity of the economy’s resilience against future shocks also in line with the 2020 new industrial strategy. The plan is consistent with the objectives of a key national development document - Slovenia’s development strategy 2030 - which relates to the implementation of the UN Sustainable Development Goals. It builds on and complements the Resolution on the Slovenian National Health Care Plan 2015-2025 “Together for a Health Society”. While a partnership agreement and operational programmes under the European Structural and Investment Funds (ESIF) for the period 2021-2027 have not been yet finalised, the plan explains per component key areas of demarcation between the RRF and ESIF and how their complementarity will be ensured. Slovenia’s plan is consistent with the challenges and priorities identified in the most recent Draft Council Recommendation on economic policy in the euro area. The plan provides both a short-term boost to the economy, through considerable investments, but also envisages a series reforms that will boost economic resilience and raise growth potential, including long-term care, healthcare and pension reforms. The reforms, particularly of the pension system, labour market, and health and long-term care systems, will also contribute towards long term fiscal sustainability. A number of measures included in the plan will help to improve the business environment and boost investment and research, development and innovation (RDI) while also ensuring the digital and green transitions. These include reforms and investments in RDI and education and training, an improved capital markets framework to attract equity investments, and new acts to address bureaucracy and improve and simplify spatial planning. Reforms to modernise public administration and increase the efficiency, and greening, of public procurement will contribute to a strengthening of the national institutional framework. In terms of administrative organisation, the government of Slovenia approved the recovery and resilience plan in the government session of 28 April 2021. The Government Office for Development and European Cohesion Policy was responsible for the preparation and coordination of the recovery and resilience plan and its submission to the European Commission. For the implementation of the plan, three offices of the Ministry of Finance - the Office for the Implementation of the RRP, the Budget Supervision Office and the Department for the Management of EU Funds - will perform the roles of the Coordinating Authority, National Audit Coordinator and National Cost Coordinator, respectively. Relevant line ministries will be involved in the implementation of individual components of the plan. Section 4.10 provides further information on the designation of entities and their respective responsibilities. The plan addresses the issues of gender equality and equal opportunities for all. In particular, the plan refers to relevant national legislation (i.e. Law on Equal Opportunities for Women and Men, Protection from Discrimination Act, and Law on Equal Opportunities for Persons with Disabilities), the EU acquis and European Pillar of Social Rights, and relevant international conventions (e.g. the UN Convention on the Rights of Persons with Disabilities). Slovenia states that respect for these principles will be ensured at all stages of preparation and implementation of the envisaged reforms and investments. The plan describes key challenges in the area of gender equality and supports them with disaggregated data and to a lesser extent addresses the challenges of equality of all. Slovenia carried out a stakeholder consultation with local and regional authorities, social partners, civil society organisations and other relevant stakeholders before the submission of the recovery and resilience plan. For the plan implementation, consultations with social partners or relevant stakeholders are envisaged for key reforms (e.g. pension system, health system, flexible forms of work, public sector pay system, renewable energy sources) before the adoption of the relevant legislation. The Technical Support Instrument (TSI) provides expertise in building capacities to implement the plan in a number of areas. Slovenia will, for example, receive technical support in the areas of pensions, healthcare, capital markets, renewable energy and nature protection needs, and transport. The Horizon Europe Policy Support Facility will be available during the implementation of the plan to provide sectoral support for the design, implementation and evaluation of research and innovation policy reforms. Slovenia’s plan includes four multi-country projects in the digital sector: i) European common data infrastructure and services; ii) Low-Power Processors and Semiconductor Chips; iii) European Blockchain Service Infrastructure; and iv) European quantum communications infrastructure. The European common data infrastructure and services and the Low-Power Processors and Semiconductor Chips projects may take shape of planned important projects of common European interest (IPCEI). Slovenia aims to contribute to building a new generation of energy-saving infrastructure and services from edge to cloud, implementing cutting edge and fast expandable industrial and service applications, and increasing the cybersecurity of cloud infrastructure and services. In addition, Slovenia’s objectives are to strengthen planning capabilities and increase the innovativeness and resilience of semiconductor value chains in the EU and Slovenia, to extend the applicability of European blockchain service infrastructure by integrating it with a series of national infrastructures, and to establish a national quantum communication infrastructure network connected to the national networks of neighbouring countries. Slovenia has engaged in close cooperation with several Member States who have expressed their interest to participate in these projects. In accordance with Article 18(4)(g) of the RRF Regulation, Slovenia carried out a security self-assessment for investments in connectivity. In the Digital transformation of the public sector and public administration component, Slovenia explains that where digital solutions are based on the use of new generation 5G networks, the 5G investments will be subject to the legislation implementing the European Commission Communication of 29 January 2020 Secure 5G deployment in the EU — Implementing the EU toolbox. Throughout the plan, several other components (i.e. C1K1 “Renewable energy and energy efficiency”, C2K1 “Digital transformation of the economy”, C3K5 “Strengthening competences, in particular digital competences and those required by the professions of the future and the green transition”, C4K1 “Health” and C4K2 “Social security and long-term care”) include a section that outlines the contribution of the measures to the Union’s open strategic autonomy and security issues. Strategic measures mentioned in the security self-assessment would need to be closely monitored during the implementation of the plan. The plan outlines a communication strategy to raise awareness and ensure visibility and recognition of the Recovery and Resilience Facility’s contribution to the economic recovery and green and digital transition of the country to the citizens. The strategy focuses on communicating both reforms and investments and identifies joint communication actions on the projects of strategic importance to be implemented together with the European Commission. In the communication strategy, the Slovenian authorities plan to target five main groups (general public, potential beneficiaries, relevant stakeholders by component, participants in project, media). General communication objectives have been developed for all target groups that will be appropriately adapted through communication messages to the target groups. Communication will take place at two levels: (i) the content by development area and component; and (ii) targeted and proportionate to the size of the projects financed. It is envisaged to use different communication channels and actions. Regionally relevant content will be communicated through the regional and local media. The overall coordination of the communication strategy and its implementation will be ensured by the coordinating body. The strategy stipulates regular monitoring of the communication impact. The scope of communication and promotion will be proportionate to the amount of funding allocated and to the strategic importance of the reform or project. The labelling will take into account the communication guidelines for European cohesion policy implemented under the Common Provisions Regulation and the specific RRF guidance issued by the European Commission. In terms of communication, special attention will be given to projects of strategic importance, which will be selected in each of the plan’s four policy clusters. Communication on these projects envisages development of national communication campaigns and active cooperation with the European Commission. For communication and dissemination of information on the Slovenian recovery and resilience plan and its implementation, the authorities have set-up a dedicated sub-page to the already existing national key landing webpage on the European funds.

State aid and competition rules fully apply to the measures funded by the Recovery and Resilience Facility. Union funds channelled through the authorities of Member States, like the RRF funds, become state resources and can constitute State aid if all the other criteria of Article 107(1) TFEU are met. When this is the case and State aid is present, these measures must be notified and approved by the Commission before Member States can grant the aid, unless those measures are covered by an existing aid scheme or comply with the applicable conditions of a block exemption regulation, in particular the General Block Exemption Regulation declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 TFEU. When State aid is present and it requires notification, it is the duty of the Member State to notify State aid measures to the Commission before granting them, in compliance with Article 108(3) TFEU. In this respect, the State aid analysis carried out by Slovenia in the recovery and resilience plan cannot be deemed a State aid notification. In as far as Slovenia considers that a specific measure contained in the recovery and resilience plan entails de minimis aid or aid exempted from the notification requirement, it is the responsibility of Slovenia to ensure full compliance with the applicable rules. 4.Summary of the assessment of the plan 4.1.Comprehensive and adequately balanced response to the economic and social situation The plan follows a holistic approach to ensure economic recovery and enhance socio-economic resilience. This is done with the support of 83 measures (33 reforms and 50 investments). The plan helps to tackle key structural challenges and paves the way for the twin transition. The total financial allocation of the recovery and resilience plan amounts to EUR 2.5 billion, with EUR 1.8 billion requested in the form of non-repayable financial support and another EUR 0.7 billion in loans. The plan’s reforms and investments have many interdependent and complementary objectives. In particular, reforms leverage the impact of associated investments, notably by bringing structural change and increasing the participation of private operators. Overall, the plan is balanced and focuses on Slovenia’s main challenges, which - beside the twin transition - largely refer to the country’s institutional resilience, effectiveness and sustainability of healthcare, long-term care, pensions and education systems, and the need to boost the productive potential of the economy by investing in research and innovation and by improving the business environment. The components in the plan address all six pillars defined in the RRF regulation: (i) green transition; (ii) digital transformation; (iii) smart, sustainable and inclusive growth, including economic cohesion, jobs, productivity, competitiveness, research, development and innovation, and a well-functioning single market with strong SMEs; (iv) social and territorial cohesion; (v) health, and economic, social and institutional resilience, with the aim of, inter alia, increasing crisis preparedness and crisis reaction capacity; and (vi) policies for the next generation, children and the youth, such as education and skills. The coverage of the plan’s components toward the six pillars is summarised in Table X below. All pillars are covered by at least one component while a component may contribute to several pillars. Green transition Digital transition Smart, sustainable & inclusive growth Social and territorial cohesion Health, and economic social and institutional resilience Policies for the next generation Green transformation C1 K1: Renewable energy and energy efficiency ● ○ ○ C1 K2: Sustainable renovation of buildings ● ○ C1 K3: A clean and safe environment ● ○ ○ C1 K4: Sustainable mobility ● ○ ○ C1 K5: Circular economy – resource efficiency ● ○ Digital Transformation C2 K1: Digital transformation of the economy ● ○ C2 K2: Digital transformation of the public sector and public administration ● ○ ○ ○ Smart sustainable and inclusive growth C3 K1: RDI – research, development and innovation ○ ○ ● C3 K2: Raising productivity, a business-friendly environment for investors ○ ○ ● C3 K3: Labour market – measures to reduce the impact of negative structural trends ● ○ ○ ○ C3 K4: Restructuring of Slovenian tourism and investment in infrastructure in the field of tourism and cultural heritage ○ ○ ● ○ C3 K5: Strengthening competences, in particular digital competences and those required by the professions of the future and the green transition ○ ○ ● ○ ● C3 K6: Efficient public institutions ○ ● ○ Health and welfare C4 K1: Health ○ ○ ● ○ C4 K2: Social security and long-term care ○ ● ○ C4 K3: Housing ● ○ ○ Key: ‘●’ investments and reforms of the component primarily contribute to the pillar; ‘○’ the component partially contributes to the pillar. Green transition The plan has a strong focus on the green transition. The five components in cluster 1 “Green transformation” that contribute primarily to the green transition pillar account for more than two-fifths of the total financial allocation. These include key reforms to unlock the renewable energy potential in component C1K1 “Renewable energy and energy efficiency”, to expand public transport and alternative fuels in component C1K4 “Sustainable mobility” and to introduce green budgetary planning in C1K5 “Circular economy”. Key investments will target the energy transition. In particular, investments in component C1K1 “Renewable energy and energy efficiency” will support the development and integration of renewable energy sources (EUR 130 million), complemented by measures to promote energy efficiency investments in the economy, as well as pilot projects to promote the use of new technologies in the economy to reduce energy consumption. Component C1K2 “Sustainable renovation of buildings” includes investments in energy efficiency of buildings (EUR 86 million) to achieve average energy savings and reductions in greenhouse gas emissions of around 30% compared with the situation prior to renovation. The plan also covers investments in climate change adaptation and environmental protection. The largest investment in the plan is included in component C1K3 “Clean and safe environment” and it addresses climate change adaptation investments focused on flood prevention (EUR 310 million). Additional significant investments on environment in the same component include measures on energy-efficient wastewater and drinking water systems (EUR 107 million). A dedicated scheme for promoting circular economy principles in production processes is also included in component C1K5 “Circular economy” (EUR 20 million). On transport, a sizeable effort is made to increase the sustainability of the sector. A very significant allocation in component C1K4 “Sustainable transport” is dedicated to the upgrading of rail infrastructures (more than EUR 280 million), complemented with investments to digitalise rail and road transport, to enable greenhouse gases emissions reductions, and investments in electric charging infrastructures to promote e-vehicles. Several other measures in other components will at least partially support the green transition pillar. These include (i) investments in research and innovation focusing on the low carbon economy, circular economy and sustainable food systems in component C3K1 “Research and innovation”; (ii) measures promoting green public procurement in component C3K2 “Raising productivity”; (iii) investments in sustainable tourism accommodation in component C3K4 “Restructuring of Slovenian tourism”; and (iv) measures in component C3K5 “Strengthening competences” focusing on the development of green skills and the provision of more modern and environmentally friendly education infrastructure. Digital transformation The components that contribute primarily to the digital transformation pillar account for 12.75% of the total financial allocation. Key measures in the two components in cluster 2 “Digital transformation” cover the digitalisation of both the public and the private sector. In particular, investments in connectivity (EUR 30 million) are expected to contribute to boost digitalisation in certain areas of the country that are currently not covered and are unlikely to be covered in the near future. Component C2K2 “Digital transformation of the public sector” includes a strategy for digital transformation of the public sector, accompanied by prominent investments. The component includes a reform that introduces electronic IDs for citizens and companies and investments in digital skills are envisaged to reduce the digital divide (EUR 66.72 million are directed to digitalisation of education, science and sport). Some key parts of the public sector (e.g. justice and internal security) will benefit from better-performing equipment and better-skilled civil servants. The digital transformation of public services linked to spatial planning, real estate, nature and water is also targeted by the plan (EUR 33.5 million). The measures included in component C2K1 “Digital transformation of the economy” will also support businesses transformation through digital technologies. Increased support for digitalisation of few consortia will aim to increase competitiveness of large companies and SMEs (EUR 44 million). This component also comprises four multi-country projects on microelectronics, cloud, quantum communication and blockchain. Several measures in other components will at least partially support the digital pillar. These include, for instance, (i) measures in smart electricity distribution network in C1K1 “Renewable energy and energy efficiency”, (ii) investments in the digitalisation of roads and rail in C1K4 “Sustainable transport”, (iii) investments in research and innovation focusing on digitalisation in component C3K1 “Research and innovation”; (iv) the establishment of a digital governance platform by beneficiaries in the investments to provide innovative ecosystems in component C3K2 “Raising productivity”; (v) investments fostering digital literacy in the education system (EUR 56 million) in C3K5 “Strengthening competences”, (vi) the digital transformation of public procurement in C3K6 “Effective public institutions; and (vii) the sizeable investments in the area of e-health in C4K1 “Health” (EUR 83 million).

Smart, sustainable and inclusive growth The components that contribute primarily to the pillar of smart, sustainable and inclusive growth account for 19.3% of the total proposed spending. Key measures are included in all components of cluster 3 “Smart sustainable and inclusive growth”. Given the wide scope of the third RRF pillar, the below list is not exhaustive. In particular, labour market and pension reforms in component C3K3 “Labour market” will contribute to sustainable growth. The pension reform will contribute to the long-term sustainability and adequacy of the pension system; legislation on a short-time work scheme that should allow the labour market to deal with major shocks in times of crisis. The plan is expected to contribute to productivity and competitiveness through a number of measures. Component C3K2 “Raising productivity” includes a reform to support the development of alternative investment funds and investments to boost productivity and investments of companies (EUR 138.5 million). Those investments take into account the role of SMEs by dedicating a very large portion of the allocation to SMEs support (EUR 121 million). Measures in component C3K4 “Restructuring of Slovenian tourism” also include prominent investments to upgrade the tourism and culture sectors (EUR 127 million) with the aim to improve the international positioning of Slovenia as a leading destination in the field of environmental sustainability. Further measures are expected to improve research, development and innovation. Component C3K1 “RDI” includes measures to increase the efficiency of public investment in RDI, accompanied by sizeable financing for research projects in the green and digital transition (EUR 117.52 million). Reforms of public institutions in component C3K6 “Effective public institutions” will contribute to lowering administrative burdens and improving public procurement. Several other measures will support at least partially the objective of smart, sustainable and inclusive growth. Those include, inter alia, measures in the field of education in component C3K5 “Strengthening competences”, and investments in support of green and digital transitions in clusters 1 and 2, particularly those sub-measures specifically targeting SMEs, such as investments to support environmentally-friendly production processes and resource efficiency in SMEs in component C1K5 “Circular economy” and investments for the digital transformation of businesses in C2K1 “Digital transformation of the economy”. Social and territorial cohesion The social and territorial cohesion dimension is mainstreamed across the plan. A number of measures relate to areas in which also European Structural and Investment Funds promote cohesion, while ensuring that double funding is avoided. Several measures across various clusters and components will contribute to the objective of territorial cohesion. These include: (i) geographically balanced investments in tourism accommodation and infrastructure (EUR 127 million) in C3K4 “Restructuring of Slovenian tourism”; (ii) connectivity measures in component C2K2 “Digital transformation of the public administration”, which will contribute to bridging the digital divide between rural and urban areas (EUR 30 million); (iii) measures in component C1K3 “Clean and safe environment”, such as investments in flood and landslide prevention (EUR 335 million) and wastewater and drinking water systems across the country (EUR 107 million). The key reforms of the labour market in component C3K3 “Labour market”, and the reforms of the healthcare and long-term care system in cluster 4 “Health and welfare”, as well as investments in lifelong learning in C3K5 “Strengthening competences” will also have an impact across the country. The territorial cohesion dimension is taken into account but is less pronounced in case of the research, development and innovation, and the raising productivity, a business-friendly environment for investors’ components. Component C4K3 “Housing” contributes primarily to the social and territorial cohesion pillar and accounts for 2.4% of the total financial allocation. The component focuses on investments totalling EUR 60 million in affordable housing to mitigate the social impact of the crisis on marginalised people. Health, and economic, social and institutional resilience The components that contribute primarily to the pillar of health, and economic, social and institutional resilience account for 12.4% of the total financial allocation. Key measures to bolster the health, social and institutional system’s resilience are foreseen in two components of cluster 4 “Health and welfare”. The limited resilience of the healthcare system will be tackled by targeted measures. Reforms in the healthcare system foreseen in component C4K1 “Health” will provide the definition of statutory health insurance rights, restructure the complementary health insurance system, reform the remuneration system for health professions, and provide sustainable financing of the system. Targeted primary care investments (mainly in training of healthcare staff) are welcomed as a starting point for further improvements in the quality of care. Key investment in healthcare is linked with improving the infrastructure and treatment of infectious and communicable diseases, as the COVID-19 epidemic showed many shortcomings in that area (EUR 110 million). Social and institutional resilience will be improved with the adoption of comprehensive legislation regulating long-term care system. These measures are included in component C4K2 “Social security and long-term care”. They will integrate both healthcare and social care services, while investments in nursing homes and care homes will set up appropriate infrastructure and improve the accessibility and quality of care (EUR 79 million). Several other measures in other components will at least partially support the objective of health, and economic, social and institutional resilience. These include, for instance, reforms and measures to improve efficiency and effectiveness of public administration in component C3K6 “Effective public institutions”, and the labour market reform in component C3K3 “Labour market”. The resilience of Slovenia’s public administration is also increased by the measures on the digital transformation of public administration (EUR 62.05 million) in component C2K2 “Digital transformation of the public administration”. By aiming to reduce the share of households below the housing poverty threshold, the measures in component C4K3 “Housing” also contribute to increasing social resilience. Policies for the next generation, children and the youth, such as education and skills The components that contribute primarily to the policies for the next generation pillar account for 10.8% of the total financial allocation. It includes important reforms and investments in component C3K5 “Strengthening competences” to improve quality of education. The plan has a strong focus on acquiring skills. In particular, sizeable investments are planned in component C3K5 “Strengthening competences”, aiming at equipping students and teachers with new skills for the digital and green transition and to improve their financial literacy (EUR 110 million). The plan also provides for more modern, digital and environmentally friendly education. Component C3K5 “Strengthening competences” also covers investments in schools infrastructure (EUR 145 million), complemented by investments in digital education (EUR 41.1 million) included in component C2K2 “Digital transformation of the public administration”, aiming at strengthening the resilience of the education system. Measures in other components will also pursue policies for the next generation, children and the youth. In particular, labour market measures in component C3K3 “Labour market” are expected to support youth employment. That component, as well as components C4K1 “Health” and C4K2 “Social security and long-term care” also include key structural reforms to address demographic trends and ensure greater intergenerational fairness. Measures in C4K3 “Housing” will target socially disadvantaged and marginalised groups, including young people and young families.

Overall assessment Taking into consideration all reforms and investments envisaged by Slovenia, its recovery and resilience plan represents, to a large extent a comprehensive and adequately balanced response to the economic and social situation, thereby contributing appropriately to all six pillars referred to in Article 3 of the RRF Regulation, taking the specific challenges and the financial allocation of Slovenia into account. This would warrant a rating of A under the assessment criterion 2.1 in Annex V of the RRF Regulation. 4.2.Link with country-specific recommendations and the European Semester Overall, the plan provides an adequate response to a large set of economic, social and environmental challenges faced by Slovenia. The plan introduces reforms and investments addressing a significant subset of the challenges identified in the country-specific recommendations to Slovenia as part of the European Semester. In particular, the plan addresses challenges related to fiscal policies and public finances, social safety nets, employment and social, business environment and investments in RDI, green and digital transitions. Slovenia has implemented measures sustaining the economy to effectively address the COVID-19 pandemic (CSR 1, 2020). Slovenia managed to attain a relatively healthy fiscal position prior to the COVID-19 crisis, reducing public debt substantially close to the 60% threshold. This allowed it to borrow relatively easily and cheaply on the markets to create sufficient fiscal space for the seven stimulus packages introduced since April 2020. These packages have so far sustained the economy and should support recovery in the near future, in line with the first recommendation of 2020. When the epidemiological situation improves, the temporary measures adopted in the crisis would need to be gradually withdrawn to achieve a prudent medium-term fiscal position and ensure debt sustainability. Social safety net The plan intends to address in a comprehensive manner the long-standing Council recommendations to Slovenia on social safety net (CSR 1, 2020, CSR 1, 2019). The plan includes the following key structural reforms of the long-term care, healthcare, and pension systems, covering the three pillars of the social safety net. The long-term care reform in component C4K2 “Social security and long-term care” is a key measure of the plan. It would establish a comprehensive long-term care regime, which currently does not exist in Slovenia. The reform will establish a new social security pillar focused on the specific needs of those requiring long-term care, ensuring equal access regardless of socio-economic status. It would cover both institutional care in nursing homes for the most complex needs as well as community day care and care at home to pursue the goal of reducing dependency on health institutions. For family members, especially for women, the new regime should reduce the burden of informal care and thereby allow them to take up (full-time) formal employment. At the same time, investments in care homes, complying with modern standards, should improve the quality of care and living considerably for all age groups. The healthcare reform in component C4K1 “Health” should make the system more efficient. Improvements in primary care should reduce the burden on (and cost of) secondary and tertiary care. Together with measures in long-term care, the healthcare reform should also lead to a better integration of long-term care and healthcare and thus improve their resilience, accessibility and quality. To address shortages of health workers, the secondary professional education in area of health and social services would be modernised and allow more enrolments at the medical faculties. The reform would be supported by the planned reform of the remuneration system of the public sector in component C3K6 “Efficient public institutions” to improve incentives and overall working conditions in the sector. The implementation of the reforms may result into higher financing needs for both healthcare and long-term care and it will therefore be crucial that all elements of the reforms (i.e. quality, accessibility and long-term fiscal sustainability) are fully implemented. The pension reform should ensure the fiscal sustainability of the system in the medium to long term. These objective should be achieved, among others, through parametric reforms and other flanking measures in component C3K3 “Labour Market”. These measures aim, for example, to prolong employment at the end of the career by limiting loopholes such as using sick leave or unemployment benefits as a bridge to retirement. Employment and social Slovenia has been relatively successful in mitigating the social and employment impact of the COVID-19 crisis (CSR 2.1, 2020). Seven stimulus packages have been adopted since April 2020 providing horizontal and sectoral support to the economy as well as employees and people in need. The plan intends to develop some of these measures further and incorporate them on a permanent legal framework in the reform foreseen in component C3K3 “Labour market”. Several measures in component C3K3 “Labour market” are intended to improve the functioning of the labour market in normal and exceptional situations (CSR 2.2, 2020). Support will be provided to companies and employees to establish more flexible working arrangements. A legal act will adopted for the crisis short-time working scheme to be applied in times of extreme stress to provide employers and employees with a dependable framework to deal with crises. The legislation on unemployment benefits will be amended to promote longer working lives. Amendments to healthcare and pension legislation are envisaged to improve occupational rehabilitation. Other measures in the same component C3K3 increasingly target active labour market policies to reduce the number of long-term unemployed persons and older workers (CSR 2, 2019). In particular, these measures target specific groups or employment situations like long-term unemployment or a low level of skills. The effectiveness of occupational rehabilitation will be increased. Employers will be incentivised to hire young staff on a permanent basis instead of as “student workers” or on other temporary contracts. This would support a faster transition of young wage earners from education into a standard employment relationship. Measures in the area of education and training should also help address the labour shortages with which Slovenia was faced in an increasing number of sectors before the outbreak of the COVID-19 crisis (CSR 1, 2019). Component C3K5 “Strengthening competences” aims to improve the resilience of the labour market and the employability of workers in precarious situations. The plan envisages support for the re-skilling and up-skilling of workers, the promotion of life-long learning, and the promotion of vocational education and apprenticeships in particular in areas with high and growing labour demand that is hard to cover like health sector. Education and training should become more relevant for the labour market and the digitalisation should play a much greater role in education. Component C4K3 “Housing” is expected to help mitigating the social impact of the crisis (CSR 2, 2020). The reform and investments in this component are expected to reduce the cost of housing for people at risk of poverty and social exclusion and other vulnerable groups by increasing the number of public housing through new constructions and activation of the existing housing stock. Business environment Several measures of the plan are expected to improve access to finance and the development of equity markets (CSR 2.1, 2019). Besides several incentive schemes, component C3K2 “Raising productivity” would establish a legal regime for alternative investment funds that would provide both investors and companies with better-tailored financial instruments and more choice in the design of their portfolios. This new regime would have to build on, and be fully consistent with, existing EU-wide capital market legislation as well as ongoing initiatives at EU level.

The plan also tackles administrative burdens and regulatory restrictions, which are other important obstacles for private entrepreneurship (CSR 2.2, 2019; CSR 3, 2020). The Debureaucratisation Act and the recast of the Construction Act and the Spatial Planning Act included in component C3K6 “Effective Public Institutions”, together with measures to reduce the cost and the time necessary to comply with administrative requirements in cluster 2 “Digital Transition”, will help the private sector to take up its economic activities after the crisis. Furthermore, at least four components (C1K1 “Renewable Energy Sources and Energy Efficiency”, C3K2 “Raising Productivity”, C3K4 “Tourism and Culture”, and C3K6 “Efficient Public Institutions” would contribute to the streamlining and modernising of regulatory requirements in their respective areas. The plan intends to further reduce the inefficiencies in Slovenia’s public procurement system (CSR 2.3, 2019). Spending the funds efficiently is a crucial success factor for the plan, since Slovenia intends to make intensive use of public calls for tenders in the implementation. Component C3K6 “Efficient Public Institutions” should help to increase the level of professionalization among stakeholders in public procurement in Slovenia, to establish a public procurement academy, to push the digital transformation of public procurement and to increase competition in public procurement procedures. Moreover, changes in the way public procurement is organised in the health sector would be part of the planed revision of the public procurement act. The plan does not address the CSR sub-part recommending to “carry out privatisations in line with the existing plans” (CSR 2.4, 2019). This seems understandable in light of the high degree of uncertainty regarding the economic developments and the improved governance of state-owned companies compared to the time when the list had been established. Furthermore, progress was made in the past on privatisations in the banking sector and plans are ongoing in the tourism sector. The plan is expected to improve the business environment, promote investment and support productivity enhancing reforms (CSR 2,3, 2019, CSR 3, 2020). Demographic changes, combined with low innovation and low public investment are undermining Slovenia’s growth potential. The components “Raising productivity, a business-friendly environment for investors” (C3K2) and “Research, development and innovation” (RDI; C3K1) comprise of measures to improve productivity in Slovenia. The former aims at improving access to capital for young and innovative companies, the provision of direct subsidies to support investments that are suited to increase the productivity of the economy, and the creation of innovative ecosystems of economic and business infrastructure. In addition, a number of other measures should contribute to higher productivity in specific sectors (e.g. in the circular economy, tourism and culture) or horizontally through the provision of a more efficient digital and physical infrastructure (e.g. the components on the digital transition, sustainable mobility or effective public institutions) or increased human capital (e.g. the component on strengthening competences). Investments in RDI, green and digital transitions The plan is expected to give a significant boost to (public) investment in Slovenia (CSR 3, 2019; CSR 3, 2020). The components of the plan combine direct public investment and support of private investments with reforms to make investments in areas like RDI more attractive and efficient, or set the necessary regulatory framework for investments in dynamic areas, such as the green transition or the circular economy. These measures would help the country meeting important targets like the 2050 climate neutrality objective and the 2030 energy and climate targets. The measures would broaden digital capacities and competences considerably. Component C3K1 “Research, development and innovation” is set to support investment in RDI through various measures and increase the efficiency and effectiveness of these investments and hence improve the performance of the national RDI ecosystem (CSR 3.1, 2019; CSR 3.8, 2020). It also aims at improving the coordination of RDI between research institutes and companies as well as among researchers. With the creation of a market for alternative investment funds Slovenia tries to channel more money into RDI by start-ups, small and mid-sized companies. As described in more detail in paragraph 4.3 below, investment in RDI under the plan will be primarily focussed on the green and digital transition and on the attractiveness of Slovenia as a location for RDI in Europe. With significant reforms and investments in cluster 1, the plan focuses investments on the green transition (CSR 3.2, 2019; CSR 3, 2020). With component C1K1 “Renewable energy and energy efficiency” Slovenia intends to adapt the relevant legislation to make investments in clean and efficient production and use of energy more attractive. As explained in more detail in paragraph 4.5 below, important reforms are expected to remove bottlenecks and provide support for obtaining consents and permits for renewables projects and to facilitate investments in energy efficiency and new technologies for demand-response services. Reforms and investments in components C3K1 “Clean and safe environment” are focused on environmental infrastructure, such as flood prevention and wastewater and drinking water systems. The measures in component C1K4 “Sustainable transport” will also promote public transport and the transition to alternative fuels. The reform and investment measures in the plan described in more detail in paragraph 4.5 below, are aimed at reducing emissions from transport, which alone is responsible for more than two-fifth of the country’s total CO2 emissions. The digital challenge (CSR 3, 2020) is addressed through two dedicated components in cluster 2 “Digitalisation” but also through specific measures in other components. The digitalisation is expected to be a core driver of economic growth in the future in Slovenia and crucial for the international competitiveness of its small open economy. As described in more detail in section 4.6 below, Slovenia intends to introduce an e-ID and to adopt a national cybersecurity strategy. Significant investments would go into the creation of cloud capacities, the digitalisation of public services, the broadband rollout (5G), the modernised digital education infrastructure, and e-health. Furthermore, the plan intends to promote the digitalisation of the public administration and the public sector. The existing one-stop shop for business operators for their dealings with the public administration and the government will be expanded to cover citizens as well. To contribute to increasing European industrial data cloud capacities and the ability to develop the most powerful, cutting edge, and sustainable processors, the plan intends to support the establishment of hybrid cloud, the development of low-consumption processors and semiconductor chips. Investments in digital infrastructure will be complemented by investment in the digital skills of employees and citizens (CSR 3.11, 2020). The development of digital literacy at all levels of education system and lifelong learning will be supported through an overhaul of curricula at all education levels (from early childhood education and care to higher education) foreseen in component C3K5 “Strengthening competences”. The aim of the measures is to integrate basic computing and digital competences in the curricula. To empower schools for this task, 20 000 teachers/educators will be trained in digital skills. Overall assessment Taking into consideration the reforms and investments envisaged by Slovenia, its recovery and resilience plan is expected to contribute to effectively addressing a significant subset of challenges identified in the country-specific recommendations, or challenges in other relevant documents officially adopted by the Commission under the European Semester, and the recovery and resilience plan represents an adequate response to the economic and social situation of Slovenia. This would warrant a rating of A under the assessment criterion 2.2 in Annex V of the RRF Regulation. Country challenges Associated CSR (2019-2020)