Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Czechia and delivering a Council opinion on the 2022 Convergence Programme of Czechia
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Czechia, digital transformation, economic policy, economic recovery, economic reform, energy policy, fiscal policy, green economy, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 23.5.2022  COM(2022) 605 final  Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Czechia and delivering a Council opinion on the 2022 Convergence Programme of Czechia {SWD(2022) 605 final} - {SWD(2022) 640 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2022 National Reform Programme of Czechia and delivering a Council opinion 
on the 2022 Convergence Programme of Czechia 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 9(2) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council2,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021.  The  Recovery  and  Resilience  Facility  provides  financial  support  for  the 
implementation of reforms and investment, entailing a fiscal impulse financed by the 
Union.  It  contributes  to  the  economic  recovery  and  to  the  implementation  of 
sustainable and growth-enhancing reforms and investment, in particular to promote the 
green and digital transition, while strengthening the resilience and potential growth of 
the Member States’ economies. It also helps strengthen sustainable public finances and 
boost growth and job creation in the medium and long term. The maximum financial 
contribution  per  Member  State  under  the  Recovery  and  Resilience  Facility  [was] 
updated on [XX] June 2022, in line with Article 11(2) of Regulation (EU) 2021/241.  

On  24  November  2021,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Survey,  marking  the  start  of  the  2022  European  Semester  for  economic  policy 
coordination.  It  took  due  account  of  the  reaffirmed  joint  commitment  of  the  Porto 
Social Summit of May 2021 to further implement the European Pillar of Social Rights, 
proclaimed  by  the  European  Parliament,  the  Council  and  the  Commission  on  17 
November  2017.  The  European  Council  endorsed  the  priorities  of  the  2022  Annual 

1 
2 

OJ L 209, 2.8.1997, p. 1. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

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Sustainable  Growth  Survey  on  25  March  2022.  On  24  November  2021,  the 
Commission adopted the Alert Mechanism Report, in which it did not identify Czechia 
as one of the Member States for which an in-depth review3 would be needed. On the 
same date, the Commission also adopted the proposal for the 2022 Joint Employment 
Report analysing the implementation of the Employment Guidelines and the principles 
of  the  European  Pillar  of  Social  Rights,  which  was  adopted  by  the  Council  on  14 
March 2022. 

Russia’s  invasion  of  Ukraine,  in  the  wake  of  the  global  pandemic,  has  significantly 
altered the geopolitical and economic context. The impact of the invasion on Member 
States’ economies has been felt for example through higher energy and food prices and 
weaker  growth  prospects.  The  higher  energy  prices  weigh  particularly  on  the  most 
vulnerable households experiencing or at risk of energy poverty. The EU is also seeing 
an unprecedented inflow of people fleeing Ukraine. In this context, on 4 March 2022, 
the  Temporary  Protection  Directive  was  triggered4  for  the  first  time,  granting 
displaced persons from Ukraine the right to legally stay in the EU, as well as access to 
education  and  training,  labour  market,  healthcare,  housing  and  social  welfare. 
Exceptional  support  is  made  available  to  Czechia  under  the  Cohesion’s  Action  for 
Refugees in Europe (CARE) initiative and through additional pre-financing under the 
Recovery  Assistance  for  Cohesion  and  the  Territories  of  Europe  (REACT-EU) 
programme  to  urgently  address  reception  and  integration  needs  for  those  fleeing 
Ukraine. 

Taking  account  of  the  rapidly  changing  economic  and  geopolitical  situation,  the 
European Semester resumes its broad economic and employment policy coordination 
in 2022, while evolving in line with the implementation requirements of the Recovery 
and  Resilience  Facility,  as  outlined  in  the  2022  Annual  Sustainable  Growth  Survey. 
The  implementation  of  the  adopted  recovery  and  resilience  plans  is  essential  for  the 
delivery of the policy priorities under the European Semester, as the plans address all 
or a significant subset of the relevant country-specific recommendations issued in the 
2019  and  2020  Semester  cycles.  The  2019  and  2020  country-specific 
recommendations  remain  equally  relevant  also  for  recovery  and  resilience  plans 
revised, updated, or amended in accordance with Articles 14, 18 and 21 of Regulation 
(EU) 2021/241, in addition to any country-specific recommendations issued up to the 
date of submission of the modified plan.  
The General Escape Clause has been active since March 20205. In its Communication 
of  3  March  20216,  the  Commission  set  out  its  view  that  the  decision  on  the 
deactivation or continued application of the general escape clause should be taken as 
an overall assessment of the state of the economy, with the level of economic activity 
in the EU or euro area compared to pre-crisis levels (end-2019) as a key quantitative 
criterion. Heightened uncertainty and strong downside risks to  the economic outlook 
in  the  context  of  war  in  Europe,  unprecedented  energy  price  hikes  and  continued 

Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 
on the prevention and correction of macroeconomic imbalances, OJ L 306, 23.11.2011, p. 25. 
Council Implementing Decision (EU) 2022/382 of 4 March 2022 establishing the existence of a mass 
influx of displaced persons from Ukraine within the meaning of Article 5 of Directive 2001/55/EC, and 
having the effect of introducing temporary protection, OJ L 71, 4.3.2022, p. 1. 
Communication from the Commission to the Council on the activation of the general escape clause of 
the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final. 
Communication  from  the  Commission  to  the  Council  on  one  year  since  the  outbreak  of  COVID-19: 
fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final. 

(3) 

(4) 

(5) 

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(6) 

(7) 

supply  chain  disturbances  warrant  the  extension  of  the  general  escape  clause  of  the 
Stability and Growth Pact through 2023. 

Following  the  approach  in  the  Council  opinion  of  18  June  2021  on  the  2021 
Convergence Programme, the fiscal stance is currently best measured as the change in 
primary  expenditure  (net  of  discretionary  revenue  measures),  excluding  COVID-19 
crisis-related  temporary  emergency  measures  but  including  expenditure  financed  by 
non-repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other 
EU funds, relative to medium-term potential growth7. Going beyond the overall fiscal 
stance, in order to assess whether national fiscal policy is prudent and its composition 
is conducive to a sustainable recovery consistent with the green and digital transitions, 
attention  is  also  paid  to  the  evolution  of  nationally-financed8  primary  current 
expenditure  (net  of  discretionary  revenue  measures  and  excluding  COVID-19  crisis-
related temporary emergency measures) and investment. 

On  2  March  2022,  the  Commission  adopted  a  Communication  providing  broad 
guidance  for  fiscal  policy  in  2023,  aiming  at  supporting  the  preparation  of  Member 
States’  Stability  and  Convergence  Programmes  and  thereby  strengthening  policy 
coordination9.  The  Commission  noted  that,  based  on  the  macroeconomic  outlook  of 
the  2022  winter  forecast,  transitioning  from  an  aggregate  supportive  fiscal  stance  in 
2020-2022  to  a  broadly  neutral  aggregate  fiscal  stance  would  appear  appropriate  in 
2023,  while  standing  ready  to  react  to  the  evolving  economic  situation.  The 
Commission announced that the fiscal recommendations for 2023 should continue to 
differentiate  across  Member  States  and  take  into  account  possible  cross-country 
spillovers. The Commission invited the Member States to reflect the guidance in their 
Stability  and  Convergence  Programmes.  The  Commission  committed  to  closely 
monitor  the  economic  developments  and  adjust  its  policy  guidance  as  needed  and  at 
the latest in its Semester spring package of late May 2022. 

(8)  With  respect  to  the  fiscal  guidance  provided  on  2  March  2022,  the  fiscal 
recommendations  for  2023  take  into  account  the  worsened  economic  outlook,  the 
heightened uncertainty and further downside risks, and the higher inflation compared 
to the winter forecast. Against these considerations, the fiscal response has to expand 
public investment for the green and digital transition and energy security, and sustain 
the purchasing power of the most vulnerable households so as to cushion the impact of 
the energy price hike and help limit inflationary pressures from second round effects 
via targeted and temporary measures; fiscal policy has to remain agile so as to adjust 
to the rapidly evolving circumstances, and be differentiated across countries depending 
on their fiscal and economic situation, including as regards the exposure to the crisis 
and the inflow of displaced persons from Ukraine. 

(9) 

On  1  June  2021,  Czechia  submitted  its  national  recovery  and  resilience  plan  to  the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 

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The  estimates  on  the  fiscal  stance  and  its  components  in  this  recommendation  are  Commission 
estimates  based  on  the  assumptions  underlying  the  Commission  2022  spring  forecast.  The 
Commission’s estimates of medium-term potential growth do not include the positive impact of reforms 
that are part of the Recovery and Resilience Plan and that can boost potential growth.  
Not financed by grants from the Recovery and Resilience Facility and other EU funds. 
Communication  from  the  Commission  to  the  Council:  Fiscal  policy  guidance  for  2023,  Brussels, 
2.3.2022, COM(2022) 85 final. 

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accordance  with  the  assessment  guidelines  of  Annex  V  to  that  Regulation.  On  8 
September 2021, the Council adopted its Decision on the approval of the assessment 
of  the  recovery  and  resilience  plan  for  Czechia10.  The  release  of  instalments  is 
conditional on a decision by the Commission, taken in accordance with Article 24(5) 
of  Regulation  (EU)  2021/241,  that  Czechia  has  satisfactorily  fulfilled  the  relevant 
milestones  and  targets  set  out  in  the  Council  Implementing  Decision.  Satisfactory 
fulfilment  presupposes  that  the  achievement  of  preceding  milestones  and  targets  has 
not been reversed. 

(10)  On 28 April 2022, Czechia submitted its 2022 National Reform Programme and, on 11 
May  2022,  its  2022  Convergence  Programme,  beyond  the  deadline  established  in 
Article 4 of Regulation  (EC) No 1466/97. To take account of their interlinkages, the 
two  programmes  have  been  assessed  together.  In  accordance  with  Article  27  of 
Regulation  (EU)  2021/241,  the  2022  National  Reform  Programme  also  reflects 
Czechia’s  bi-annual  reporting  on  the  progress  made  in  achieving  its  recovery  and 
resilience plan.  

in 

the 

relevant 

addressing 

(11)  The Commission published the 2022 country report for Czechia11 on 23 May 2022. It 
assessed  Czechia’s  progress 
country-specific 
recommendations adopted by the Council in 2019, 2020 and 2021, and took stock of 
Czechia’s  implementation  of  the  recovery  and  resilience  plan,  building  on  the 
Recovery  and  Resilience  Scoreboard.  Based  on  this  analysis,  the  country  report 
identified gaps with respect to those challenges that are not addressed or only partially 
addressed  by  the  recovery  and  resilience  plan,  as  well  as  new  and  emerging 
challenges,  including  those  emerging  from  Russia’s  invasion  of  Ukraine.  It  also 
assessed Czechia's progress on implementing the European Pillar of Social Rights and 
on achieving the EU headline targets on employment, skills and poverty reduction, as 
well as progress in achieving the UN’s Sustainable Development Goals.  

(12)  On  23  May  2022,  the  Commission  issued  a  report  under  Article  126(3)  TFEU.  This 
report discussed the budgetary situation of Czechia, as its general government deficit 
in  2021  exceeded  the  3%  of  GDP  Treaty  reference  value.  The  report  concluded  that 
the  deficit  criterion  was  not  fulfilled.  In  line  with  the  Communication  of  2  March 
2022,  the  Commission  did  not  propose  to  open  new  excessive  deficit  procedures  in 
spring 2022 and it will reassess the relevance of  proposing to  open excessive deficit 
procedures in autumn 2022. 

the  economy  and  support 

(13)  On  20  July  2020,  the  Council  recommended  Czechia  to  take  in  2020  and  2021  all 
necessary measures, in line with the general escape clause, to  effectively address the 
pandemic,  sustain 
the  ensuing  recovery.  It  also 
recommended  Czechia  to  pursue,  when  economic  conditions  allow,  fiscal  policies 
aimed  at  achieving  prudent  medium-term  fiscal  positions  and  ensuring  debt 
sustainability,  while  enhancing  investment.  In  2021,  based  on  data  validated  by 
Eurostat, Czechia’s general government deficit increased from 5.8% of GDP in 2020 
to  5.9%  in  2021.  The  fiscal  policy  response  by  Czechia  supported  the  economic 
recovery in  2021, while temporary emergency support measures  declined from  3.1% 
of GDP in 2020 to 2.3% in 2021. The measures taken by Czechia in 2021 have been in 
line with the Council Recommendation of 20 July 2020. The discretionary budgetary 

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Council Implementing Decision of 8 September 2021 on the approval of the assessment of the recovery 
and resilience plan for Czechia (ST 11047/21; ST 11047/21 ADD 1; ST 11047/21 COR 1)  
SWD(2022)605  

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measures  adopted  by  the  government  in  2020  and  2021  were  mostly  temporary  or 
matched by offsetting measures. At the same time, some of the discretionary measures 
adopted  by  the  government  over  the  period  2020  to  2021  were  not  temporary  or 
matched  by  offsetting  measures,  mainly  consisting  of  reductions  of  the  Personal 
Income  Tax  with  an  impact  of  about  1.9%  of  GDP.  Based  on  data  validated  by 
Eurostat, general government debt stood at 41.9% of GDP in 2021. 

(14)  The  macroeconomic  scenario  underpinning  the  budgetary  projections  in  the  2022 
Convergence Programme is cautious in 2022 and favourable in 2023. The government 
projects  real  GDP  to  grow  by  1.2%  in  2022  and  3.6%  in  2023.  By  comparison,  the 
Commission’s  2022  spring  forecast  projects  a  higher  real  GDP  growth  of  1.9%  in 
2022 and  lower GDP  growth of 2.7% in  2023, mainly due to  a  different  outlook for 
private consumption resulting from different assumptions regarding the use of savings 
and  indexation  of  salaries.  In  its  2022  Convergence  Programme,  the  government 
expects that the headline deficit will decrease to 4.5% of GDP in 2022 and to 3.2% in 
2023. The decrease mainly reflects the unwinding of most emergency measures and a 
high  nominal  GDP  growth.  According  to  the  Programme,  the  general  government 
debt-to-GDP  ratio  is  expected  to  increase  to  42.7%  in  2022,  and  to  rise  to  43.4%  in 
2023.  Based  on  policy  measures  known  at  the  cut-off  date  of  the  forecast,  the 
Commission 2022 spring forecast projects a government deficit for 2022 and 2023 of 
4.3% of GDP and 3.9% respectively. This is in line for 2022 and higher than the 2023 
deficit  projected  in  the  2022  Convergence  Programme,  mainly  due  to  a  slightly  less 
optimistic macroeconomic scenario of the Commission  2022 spring forecast and due 
to  different  assumptions  regarding  the  rate  of  inflation  and  its  pass-through  onto 
government expenses. The Commission 2022 spring forecast projects a similar general 
government debt-to-GDP ratio, of 42.8% in 2022 and 44.0% in 2023. 

(15) 

Based  on  the  Commission  spring  2022  forecast,  the  medium-term  (10-year  average) 
potential output growth is estimated at 2.0 %. However, this estimate does not include 
the  impact  of  the  reforms  that  are  part  of  the  Recovery  and  Resilience  Plan  and  can 
boost Czechia’s potential growth. 

In 2022, the government phased out the majority of measures taken in response to the 
COVID-19 crisis, such that the temporary emergency support measures  are projected 
to  decline  from  2.3%  of  GDP  in  2021  to  0.1%  in  2022.  The  government  deficit  is 
impacted  by  the  measures  adopted  to  counter  the  economic  and  social  impact  of  the 
increase in energy prices, which in the Commission spring 2022 forecast are estimated 
at 0.1% of GDP in 2022 and are expected to be phased out in 2023.12 These measures 
mainly consist of cuts to indirect taxes on energy consumption. These measures have 
been announced as temporary. However, in case energy prices remain elevated also in 
2023,  some  of  these  measures  could  be  continued.  Some  of  these  measures  are  not 
targeted, notably the across the board cuts in excise duties. The government deficit is 
also  impacted  by  the  costs  to  offer  temporary  protection  to  displaced  persons  from 
Ukraine, which in the Commission 2022 spring forecast are projected at 0.4% of GDP 
in 2022 and 0.6 in 2023.13  

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The figures represent the level of annual budgetary costs of those measures taken since autumn 2021, 
including current revenue and expenditure as well as – where relevant – capital expenditure measures. 
The total number of displaced persons from Ukraine to the EU is assumed to gradually reach 6 million 
by  the  end  of  2022,  and  their  geographical  distribution  is  estimated  based  on  the  size  of  the  existing 
diaspora, the relative population of the receiving Member State, and the actual distribution of displaced 
persons from Ukraine across the EU as of March 2022. For budgetary costs per person, estimates are 

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(16)  On  18  June  2021,  the  Council  recommended  that  in  2022  Czechia14  maintain  a 
supportive  fiscal  stance,  including  from  the  impulse  provided  by  the  Recovery  and 
Resilience  Facility,  and  preserves  nationally-financed 
It  also 
recommended  Czechia  to  pursue,  when  economic  conditions  allow,  a  fiscal  policy 
aimed  at  achieving  prudent  medium-term  fiscal  positions  and  ensuring  fiscal 
sustainability  in  the  medium  term,  and  at  the  same  time,  to  enhance  investment  to 
boost growth potential. 

investment. 

(17) 

(18) 

In  2022,  based  on  the  Commission’s  2022  spring  forecast  and  including  the 
information incorporated in Czechia’s 2022 Convergence Programme, the fiscal stance 
is  projected  to  be  broadly  neutral  at  +0.1%  of  GDP,  while  Council  recommended  a 
supportive  stance.15  Czechia  plans  to  provide  continued  support  to  the  recovery  by 
making use of the Recovery and Resilience Facility to finance additional investment as 
recommended  by  the  Council.  The  positive  contribution  to  economic  activity  of 
expenditure financed by Recovery and Resilience Facility grants and other EU funds is 
projected to increase by  1.0 percentage point of GDP compared to 2021. Nationally-
financed investment is projected to provide a contractionary contribution to the fiscal 
stance of 0.6 percentage points in 2022.16 Therefore, Czechia does not plan to preserve 
nationally  financed  investment.  At  the  same  time,  the  growth  in  nationally  financed 
primary  current  expenditure  (net  of  new  revenue  measures)  in  2022  is  projected  to 
provide  a  contractionary  contribution  of  0.7  percentage  points  to  the  overall  fiscal 
stance.  This  includes  the  additional  impact  of  the  measures  to  address  the  economic 
and social impact of the increase in energy prices (0.03% of GDP) as well as the costs 
to offer temporary protection to displaced persons from Ukraine (0.4 % of GDP).   

In 2023, the fiscal stance is projected in the Commission 2022 spring forecast at 0.1% 
of  GDP  on  a  no-policy  change  assumption.17  Czechia  is  projected  to  continue  using 
the  grants  from  the  Recovery  and  Resilience  Facility  in  2023  to  finance  additional 
investment in support of the recovery. The positive contribution  to economic activity 
of  expenditure  financed  by  Recovery  and  Resilience  Facility  grants  and  other  EU 
funds  is  projected  to  increase  by  0.1  percentage  point  of  GDP  compared  to  2022. 
Nationally-financed investment is projected to provide an expansionary contribution to 
the fiscal  stance  of 0.2 percentage points in  2023.18 At the same time, the  growth in 
nationally  financed  primary  current  expenditure  (net  of  new  revenue  measures)  in 
2023 is projected to provide a contractionary contribution of 0.4 percentage points to 
the overall fiscal stance. This includes the impact from the phasing out of the measures 
addressing  the  increased  energy  prices  (0.1%  of  GDP)  and  additional  costs  to  offer 
temporary protection to displaced persons from Ukraine (0.2% of GDP). 

based on the Euromod microsimulation model of the Commission’s Joint Research Centre, taking into 
account both cash transfers people may be eligible for as well as in-kind benefits such as education and 
healthcare. 
Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Convergence 
Programme of Czechia, OJ C 304, 29.7.2021, p. 10. 
A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 
Other  nationally-financed  capital  expenditure  is  projected  to  provide  an  expansionary  contribution  of 
0.3 percentage points of GDP. 
A negative (positive) sign of the indicator corresponds to  an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 
Other nationally-financed capital expenditure is projected to provide a neutral contribution. 

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(19) 

limiting 

the  growth  of  public  expenditure  – 

In the 2022 Convergence Programme, the government deficit is expected to gradually 
decline to 3.2% of GDP in 2023, 2.9% in 2024 and to 2.7% by 2025. Therefore, the 
general  government  deficit  is  planned  to  go  below  3%  of  GDP  by  2024.  These 
projections  assume 
including 
compensation of employees, intermediate consumption and social transfers in kind – at 
a pace lower than that of revenue growth and lower than the nominal GDP growth. A 
decline in public investments as percentage of GDP is also envisaged after the peak in 
2023.  According  to  the  Programme,  the  general  government  debt-to-GDP  ratio  is 
expected  to  increase  by  2025,  specifically  with  an  increase  to  44.4%  in  2024,  and  a 
rise to  45.4% in  2025.  Based on the Commission’s analysis, debt  sustainability risks 
appear medium over the medium term. 

(20)  Czechia faces fiscal sustainability risks in the medium and long term. This is the result 
of  an  unfavourable  starting  balance  and  the  costs  of  ageing.  The  starting  balance  is 
negatively affected by the permanent  tax reductions implemented in  the past  2  years 
(the largest resulting from the reduction in the personal income tax base). These have 
not  been  offset  by  corresponding  spending  cuts  and  have  led  to  an  increase  in  the 
structural  deficit.  Over  the  medium  to  long  term,  additional  pressures  stem  from 
ageing costs. A projected doubling of the old-age dependency ratio (according to the 
2021 Ageing Report issued by the Commission) and the capping of the retirement age, 
underpin the expected increase in pension expenditure from 8.8% of GDP in 2030 to 
11.4%  by  2050.  In  addition,  public  spending  on  healthcare  and  long-term  care  is 
projected  to  increase  by  0.9  percentage  points  and  1.7  percentage  points  of  GDP 
respectively by 2070 due to  the ageing population. While the fragmentation of long-
term care governance and financing is already covered in the recovery resilience plan, 
further addressing ageing-related challenges will be essential to restore the long term 
sustainability  of  public  finances.  Policy  options  include  raising  the  retirement  age  in 
line with the increase in life expectancy, adjusting the pension indexing rates to reflect 
the  fiscal  sustainability  of  the  pension  system,  incentivising  the  increase  in 
participation rates of people over 60, or taking other measures to strengthen the labour 
supply. 

(21) 

in  addition 

in  2019  and  2020, 

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2, to Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. These help address 
all  or  a  significant  subset  of  the  economic  and  social  challenges  outlined  in  the 
country-specific  recommendations  addressed  to  Czechia  by  the  Council  in  the 
European  Semester 
to  any  country-specific 
recommendations issued up to the date of adoption of a plan. In particular, on energy, 
Czechia  plans  to  use  the  Recovery  and  Resilience  Facility  to  expand  the  use  of 
renewable  energy  sources,  in  particular  photovoltaics,  improve  energy  efficiency  in 
residential  and  public  buildings  and  support  the  replacement  of  coal-fired  boilers  in 
households.  Sustainable  transport  is  promoted  by  investing  in  railway  infrastructure, 
clean  urban  transport  and  by  encouraging  the  use  of  low-emission  vehicles. 
Recommendations  in  the  area  of  R&D  are  addressed  by  investment  geared  at 
strengthening public-private cooperation as well as innovation framework support  and 
financial/non-financial support to innovative firms. The business environment is being 
improved  by  several  e-government  measures,  anti-corruption  reforms  and  a 
comprehensive reform of the procedure for granting building permits, which currently 
represent  major  obstacles  to  investment  in  Czechia.  Key  measures  to  address  the 
labour  market  recommendations  include  upskilling  and  reskilling  programmes  to 
prepare  the  labour  force  for  the  green  and  digital  transition,  and  new  childcare 

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facilities for children under 3 years to boost the number of women working or looking 
for  a  job.  On  education,  the  plan  aims  to  boost  the  digital  literacy  of  pupils  and 
teachers, to provide schools with digital equipment, while ensuring inclusive education 
through  support  to  disadvantaged  schools  and  tutoring.  Healthcare  recommendations 
are  addressed  through  increased  cancer  prevention  and  rehabilitation  care,  the 
development of an e-health portal to promote integrated care practices, and support to 
education in healthcare. Further complementary actions include measures to improve 
long-term care.  

(22)  The  implementation  of  the  recovery  and  resilience  plan  of  Czechia  is  expected  to 
contribute  to  making  further  progress  on  the  green  and  digital  transition.  Measures 
supporting  the  climate  objectives  in  Czechia  account  for  42%  of  the  plan’s  total 
allocation, while measures supporting digital objectives account for 22% of the plan’s 
total allocation. The fully-fledged implementation of the recovery and resilience plan, 
in line with the relevant milestones and targets, will help Czechia swiftly recover from 
the fallout of the COVID-19 crisis, while strengthening its resilience. The systematic 
involvement of social partners and other  relevant  stakeholders  remains  important  for 
the  successful  implementation  of  the  recovery  and  resilience  plan,  as  well  as  other 
economic and employment policies going beyond the plan, to ensure broad ownership 
of the overall policy agenda. 

(23)  Czechia  submitted  the  Partnership  Agreement  on  16  December  2021,  followed  by 
seven  programmes  submitted  in  December  2021  and  January  202219.  The  Just 
Transition Programme was submitted on 16 March 2022. In line with Regulation (EU) 
2021/1060  of the European Parliament and of the Council of 24 June 2021, Czechia 
shall  take  into  account  the  relevant  country-specific  recommendations  in  the 
programming  of  the  2021-2027  cohesion  policy  funds.  This  is  a  prerequisite  for 
improving the effectiveness and maximising the added value of the financial support 
to  be  received  from  cohesion  policy  funds,  while  promoting  the  coordination, 
complementarity and coherence between these funds and other Union instruments and 
funds.  The  successful  implementation  of  the  Recovery  and  Resilience  Facility  and 
cohesion  policy  programmes  also  depends  on  the  removal  of  bottlenecks  to 
investments  to  support  the  green  and  digital  transition  and  balanced  territorial 
development.  

(24)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Czechia  faces  a  number  of  additional  challenges  related  to  housing.  Housing 
affordability  in  Czechia  has  been  among  the  lowest  in  the  EU  in  the  past  5  years. 
Moreover, the low social housing stock cannot meet the demand of all low-income and 
vulnerable households (it accounted for 0.4% of total housing stock in 2019 versus 7-
8% on average in the EU), and existing housing allowances are underutilised. In recent 
years, cohesion policy funding has supported investments in new social housing units, 
and the new programming period will continue to promote social inclusion, including 
via  social  housing.  Czechia  lacks  legislation  on  social  housing  as  well  as  a 
comprehensive  framework.  This  hampers  coordination  of  the  fragmented  housing 

19 

Regulation  (EU)  2021/1060  of  the  European  Parliament  and  of  the  Council  of  24  June  2021  laying 
down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund 
Plus,  the  Cohesion  Fund,  the  Just  Transition  Fund  and  the  European  Maritime,  Fisheries  and 
Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the 
Internal  Security  Fund  and  the  Instrument  for  Financial  Support  for  Border  Management  and  Visa 
Policy. OJ L 231, 30.6.2021, p. 159. 

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policies, and a definition of responsibilities among national  and  regional bodies. The 
pandemic  and  influx  of  people  fleeing  Ukraine  have  further  exacerbated  these  pre-
existing challenges. 

(25) 

In  response  to  the  mandate  by  the  EU  Heads  of  State  or  Government,  set  out  in  the 
Versailles Declaration, the REPowerEU plan aims to phase out the European Union´s 
dependence  on  fossil  fuel  imports  from  Russia as  soon  as  possible.  For  this  purpose 
the most suitable projects, investments and reforms, at national, regional and EU level 
are being identified in dialogue with the Member States. These measures aim to reduce 
overall reliance on fossil fuels and shift fossil fuel imports away from Russia. 

(26)  The  scale  and  pace  of  Czechia’s  green  energy  transition  is  insufficient.  To  reduce  
dependence on fossil fuels, including natural gas, the acceleration of the roll-out of of 
renewables with a particular focus on solar, wind and heat pumps is crucial. Granting 
permits  for  new  installations  can  be  simpler  and  faster,  and  the  accompanying 
regulatory  framework  can be improved.  Czechia’s energy  intensity is double the EU 
average,  which  means  it  would  also  benefit  from  front-loading  energy  savings  by 
targeting  deep  renovations.  Accelerating  investments  in  the  decabornisation  of  the 
heating and industrial sectors is another key element. Further increase in ambition for 
reducing greenhouse gas emissions, and increasing renewables and energy efficiency 
targets will be needed for Czechia to be in line with the ‘Fit for 55’ objectives. 

(27)  According to 2020 data, all imported natural gas comes from Russia (100% compared 
to  44%  for  the  EU  average),  and  the  dependency  on  Russia  for  crude  oil  (49% 
compared to 26%) and coal (70% compared to 54%) is also significantly above the EU 
average20.  The  shares  of  natural  gas  (17.7%  compared  to  24.4%)  and  oil  (20.9% 
compared to 32.7%) in the energy mix are lower than the EU average, while the share 
of coal is higher (29.6% compared to 10.8%). Nuclear makes up 18.2% of the energy 
mix  compared  to  13.1%  for  the  EU,  and  renewables  and  biofuels  13.4%.  Czechia´s 
current  2030 goal  for renewables is  22%, and while the recovery  and resilience plan 
includes investments for the construction of at least 270 MW of photovoltaic power, 
this represents only a small fraction of the total installed  renewables power capacity. 
Czechia  will  need  to  accelerate  the  rollout  of  renewables  in  particular  by  improving 
the  regulatory  and  permit  frameworks.  Simplified  authorisation  procedures  for 
renewables  in  a  one-stop-shop,  increased  thresholds  for  exemptions  to  building 
permits and compulsory registration of renewable installation owners as entrepreneurs, 
and easier access to available grid capacity are examples of measures that would serve 
this objective. Further supporting measures could include a review of the energy and 
renewables laws, as  well as of the corresponding support schemes (e.g. incentivising 
energy  communities,  tariff  support  for  small-scale  renewables;  auctions  for  new 
installations;  new  support  schemes  for  sectoral  targets;  renewables  in  heating  and 
cooling;  targeted  support  for  heat-pumps,  geothermal,  renewable  hydrogen  and 
sustainable  bio-methane).  Czechia  would  also  benefit  from  digitalising  and 
modernising the electricity network in order to accommodate for an increased level of 
intermittent  renewables  in  the  grid,  coupled  with  investments  in  energy  storage 

20 

Eurostat (2020), share of Russian imports over total imports of natural gas, crude oil and hard coal. For 
the  EU27  average,  the  total  imports  are  based  on  extra-EU27  imports.  For  Czechia,  total  imports 
include  intra-EU  trade.  Crude  oil  does  not  include  refined  oil  products.  Czechia  has  an  indirect 
dependency on Russian imports through intra-EU trade. Accounting for the secondary dependence on 
Russian  coal  through  intra-EU  imports  would  lead  to  the  estimation  that  Czechia  has  a  70%  Russian 
import dependency on hard coal. 

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facilities.  Leveraging  the  existing  interconnected  gas  network  and  available  storage 
capacity  is  instrumental  to  shifting    natural  gas  imports  away  from  Russia.  New 
infrastructure and network investments  related to  gas  are recommended to  be future-
proof  where  possible,  in  order  to  facilitate  their  long-term  sustainability,  through 
future repurposing for sustainable fuels.    

(28)  While the recovery and resilience plan and the 2021-2027 cohesion fund programmes 
contain  significant  building  renovation  investments,  further  efforts  will  be  needed  to 
address  Czechia’s  above-average  unitary  heat  consumption  in  the  building  sector. 
There  is  scope  to  accelerate  and  deepen  the  energy  renovation  of  buildings, 
consistently  apply  the  ‘energy  efficiency  first  principle’,  invest  in  renewable  heat 
sources, prepare a national strategy for the decarbonisation of  building stock heating, 
establish a sustainable  energy agency  at  national level,  and  adopt  an  auction  support 
scheme for energy efficiency measures in industry and small businesses. Buildings and 
heating networks connected to coal-based district heating need to be renovated to the 
highest energy efficiency standards as soon as possible to ensure a cost-effective coal 
phase-out. 

(29)  While  the  acceleration  of  the  transition  towards  climate  neutrality  and  away  from 
fossil fuels  will create significant restructuring    costs in  several sectors,  Czechia can 
make  use  of  the  Just  Transition  Mechanism  in  the  context  of  cohesion  policy  to 
alleviate the socio-economic impact  of the transition  in  the most  affected  regions.  In 
addition,  Czechia  can  make  use  of  the  European  Social  Fund  Plus  to  improve 
employment opportunities and strenghten social cohesion.   

(30) 

In  the  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2022 
Convergence Programme and its opinion21 is reflected in recommendation (1) below. 

HEREBY RECOMMENDS that Czechia take action in 2022 and 2023 to:  

1. 

2. 

3. 

4. 

In 2023, ensure that the growth of nationally-financed current expenditure is in line 
with  an  overall  neutral  policy  stance,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and 
to  people  fleeing  Ukraine.  Stand  ready  to  adjust  current  spending  to  the  evolving 
situation.  Expand  public  investment  for  the  green  and  digital  transition  and  for 
energy  security,  including  by  making  use  of  the  RRF,  RePowerEU  and  other  EU 
funds. For the period beyond 2023, pursue a fiscal policy aimed at achieving prudent 
medium-term  fiscal  positions.  Take  measures  to  ensure  the  long-term  fiscal 
sustainability of public finances, including the sustainability of the pension system.  

Proceed with the implementation of its recovery and resilience plan, in line with the 
milestones  and  targets  included  in  the  Council  Implementing  Decision  of  8 
September 2021. Swiftly finalise the negotiations with the Commission of the 2021-
2027  cohesion  policy  programming  documents  with  a  view  to  starting  their 
implementation.   

Strengthen  the  provision  of  social  and  affordable  housing,  including  by  adopting  a 
specific legislative framework for social housing and improved coordination between 
different public bodies. 

Reduce overall reliance on fossil fuels and diversify of fossil fuel imports. Accelerate 
the  deployment  of  renewables,  streamline  permit  procedures  and  make  grid  access 

21 

Under Article 9(2) of Council Regulation (EC) No 1466/97. 

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easier. Increase the energy efficiency of district heating systems and of the building 
stock by incentivising deep renovations and renewable heat sources.  

Done at Brussels, 

For the Council 
The President 

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