Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Germany and delivering a Council opinion on the 2022 Stability Programme of Germany
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Germany, digital transformation, economic policy, economic recovery, economic reform, energy policy, investment, labour market, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 23.5.2022  COM(2022) 606 final  Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Germany and delivering a Council opinion on the 2022 Stability Programme of Germany {SWD(2022) 606 final} - {SWD(2022) 640 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2022 National Reform Programme of Germany and delivering a Council opinion 
on the 2022 Stability Programme of Germany 

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 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) 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) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  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 transitions, 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.  

(2) 

On  24  November  2021,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Survey,  marking  the  start  of  the  2022  European  Semester  for  economic  policy 

1 
2 
3 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
stablishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

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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 
Sustainable Growth Survey on 25 March 2022. On 24 November 2021, on the basis of 
Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted  the  Alert  Mechanism 
Report, in which it identified Germany as one of the Member States for which an in-
depth  review4  would  be  needed.  On  the  same  date,  the  Commission  also  adopted  a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which was adopted on 5 April 2022 by the Council, as well as 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  triggered5  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. 

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 20206. In its Communication 
of  3  March  20217,  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 

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) 

criterion. Heightened uncertainty and strong downside risks to  the economic outlook 
in  the  context  of  war  in  Europe,  unprecedented  energy  price  hikes  and  continued 
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 Stability 
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  growth8.  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  financed9  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 
coordination10. 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. 

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10 

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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(9) 

On 28 April 2021, Germany 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 
accordance with the assessment guidelines of Annex V to that Regulation. On 13 July 
2021,  the  Council  adopted  its  Decision  on  the  approval  of  the  assessment  of  the 
recovery and resilience plan for  Germany11. 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  Germany  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 2 May 2022, Germany submitted its 2022 National Reform Programme and, on 27 
April  2022,  its  2022  Stability  Programme,  in  line  with  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 
Germany’s  bi-annual  reporting  on  the  progress  made  in  achieving  its  recovery  and 
resilience plan.  

the 

(11)  The Commission published the 2022 country report for Germany12 on 23 May 2022. It 
assessed  Germany’s  progress 
relevant  country-specific 
in  addressing 
recommendations adopted by the Council in  2019, 2020 and 2021 and  took stock of 
Germany’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  Germany'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)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No  1176/2011  for  Germany  and  published  its  results  on  23  May  202213.  The 
Commission concluded that Germany is experiencing macroeconomic imbalances. In 
particular,  vulnerabilities  relate  to  a  persistent  large  current  account  surplus,  which 
reflects subdued investment relative to savings, and has cross-border relevance. 

(13)  On  27  April  2022,  Germany  submitted  a  new  Draft  Budgetary  Plan  for  2022.    The 
Commission  has  provided  an  Opinion  on  that  Plan  in  accordance  with  Article  7  of 
Regulation (EU) No 473/2013. 

(14)  On  23  May  2022,  the  Commission  issued  a  report  under  Article  126(3)  TFEU.  This 
report discussed the budgetary situation of Germany, 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 

11 

12 
13 

Council Implementing Decision of 13 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Germany (ST 10158/2021; ST 10158/2021 ADD)  
COM(2022)607 final, 23.05.2022 
COM(2022)600 final and SWD(2022)629 final, 23.05.2022.  

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spring 2022 and it will  reassess  the relevance of  proposing to  open excessive deficit 
proceduresin autumn 2022. 

the  economy  and  support 

(15)  On  20  July  2020,  the  Council  recommended  Germany  to  take  in  2020  and  2021  all 
necessary measures, in line with the general escape clause, to  effectively address the 
the  ensuing  recovery.  It  also 
pandemic,  sustain 
recommended  Germany  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,  Germany’s  general  government  deficit  fell  from  4.3%  of  GDP  in  2020  to 
3.7%  in  2021.  The  fiscal  policy  response  by  Germany  supported  the  economic 
recovery in 2021, while temporary emergency support measures increased from 2.7% 
of GDP in 2020 to 4.2% in 2021. The measures taken by Germany in 2021 have been 
in  line  with  the  Council  Recommendation  of  20  July  2020.  The  discretionary 
budgetary  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 an increase in 
family  allowances  like  the  child  allowance  and  child  tax  free  allowance  as  well  as 
increased  possibilities  for  depreciation.  Based  on  data  validated  by  Eurostat,  general 
government debt stood at 69.3% of GDP in 2021. 

(16)  The  macroeconomic  scenario  underpinning  the  budgetary  projections  in  the  2022 
Stability  Programme  is  favourable  in  2022  and  realistic  thereafter.  The  government 
projects  real  GDP  to  grow  by  3.6%  in  2022  and  2.3%  in  2023.  By  comparison,  the 
Commission’s 2022 spring forecast projects a lower real GDP growth of 1.6% in 2022 
and a similar of 2.4% in 2023. This difference is mainly due to different cut-off dates 
of the projections, which in the case of the Stability Programme was before the start of 
Russia’s war of aggression against Ukraine when the growth outlook for 2022 was still 
more  optimistic.  In  its  2022  Stability  Programme,  the  government  expects  that  the 
headline deficit will remain at 3¾% of GDP in 2022 and decrease to 2% in 2023. The 
similar  level  in  2022  mainly  reflects  continued  emergency  measures  due  to  the 
pandemic, increased defence spending and measures against heightened energy prices 
in reaction to the war in Ukraine together with additional spending and investment in 
the  green  transition.  According  to  the  Programme,  the  general  government  debt-to-
GDP ratio is expected to decrease to 66¾% in 2022, and to 65¾% 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  2.5% of GDP and  1.0% 
respectively. This is lower than the deficit projected in the 2022 Stability Programme 
for  2022  and  2023,  mainly  due  to  slightly  lower  tax  revenue  projections  based  on 
cautious  calculations  in  November  2021  and  more  optimistic  expectations  for 
implementing  subsidies  and  public  investment  in  the  Programme.  The  Commission 
2022  spring  forecast  projects  a  similar  general  government  debt-to-GDP  ratio,  of 
66.4%  in  2022  and  a  lower  of  64.5%  in  2023.  The  difference  is  due  to  a  similar 
difference in the deficit forecast. 

Based  on  the  Commission  spring  2022  forecast,  the  medium-term  (10-year  average) 
potential output growth is estimated at 1.1%. However, this estimate does not include 
the  impact  of  the  reforms  that  are  part  of  the  Recovery  and  Resilience  Plan  and  can 
boost Germany’s potential growth. 

(17) 

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 

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to  decline  from  4.2%  of  GDP  in  2021  to  1.2%  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 0.7% of GDP in 2022 and are expected to be phased out in 2023.14 These measures 
mainly consist of a targeted subsidy for heating costs; advancement in the abolition of 
the levy for renewable energy (EEG-Umlage); advancement of increase in commuter 
allowance (Pendlerpauschale); reduction of the energy tax on fuels for 3 months; one-
time payment of energy price lump-sum (Energiepreispauschale) and supplement for 
every  child;  one-time  lump-sum  payment  to  receivers  of  social  assistance;  monthly 
ticket  for  local  public  transport  at  reduced  price  for  3  months.  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 increase in commuter allowance and the reduction of the energy 
tax on fuels. 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  0.1%  of  GDP  in  2022  and  0.2%  in  202315,  as  well  as  the 
increased cost of defence expenditure by 0.4% of GDP in 2022 and 0.5% of GDP in 
2023.  

(18)  On  18  June  2021,  the  Council  recommended  that  in  2022  Germany16  maintain  a 
supportive  fiscal  stance,  including  the  impulse  provided  by  the  Recovery  and 
Resilience Facility, and preserve nationally financed investment. It also recommended 
Germany  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. 

(19) 

In  2022,  based  on  the  Commission’s  2022  spring  forecast  and  including  the 
information incorporated in Germany’s 2022 Stability Programme, the fiscal stance is 
projected  to  be  supportive  at  -1.6%  of  GDP  as  recommended  by  the  Council.17 
Germany  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  remain 
stable  compared  to  2021.  Nationally  financed  investment  is  projected  to  provide  an 
expansionary  contribution  to  the  fiscal  stance  of  0.2  percentage  points  in  2022.18 

14 

15 

16 

17 

18 

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 
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  Stability 
Programme of Germany, OJ C 304, 29.7.2021, p. 18. 
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  contractionary  contribution  of 
0.1 percentage point of GDP. 

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financed 

to  preserve  nationally 

Therefore,  Germany  plans 
investment,  as 
recommended  by  the  Council.  At  the  same  time,  the  growth  in  nationally-financed 
primary  current  expenditure  (net  of  new  revenue  measures)  in  2022  is  projected  to 
provide  an  expansionary  contribution  of  1.5  percentage  points  to  the  overall  fiscal 
stance. This significant expansionary contribution includes the additional impact of the 
measures  to  address  the economic and social impact  of the increase in  energy prices 
(0.7% of GDP) as well as the costs to offer temporary protection to displaced persons 
from Ukraine (0.1% of GDP), while additional spending for the green transition (0.2% 
of GDP) is also projected to contribute to the growth in net current expenditure. 

(20) 

(21) 

In 2023, the fiscal stance is projected in the Commission 2022 spring forecast at 0.6% 
of GDP on a no-policy change assumption.19 Germany 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  decrease  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  0.1  percentage  point  in  2023.20  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 0.7 percentage points to 
the overall fiscal stance. This includes the impact from the phasing out of the measures 
addressing  the  increased  energy  prices  (0.7%  of  GDP)  and  additional  costs  to  offer 
temporary protection to displaced persons from Ukraine (0.05% of GDP) compared to 
2022. 

In  the  2022  Stability  Programme,  the  general  government  deficit  is  expected  to 
gradually  decline  to  1¾%  of  GDP  in  2024  and  to  1%  by  2025.  These  projections 
assume  increasing  government  revenues  as  a  percentage  of  GDP,  while  government 
expenditure as a percentage of GDP is expected to remain relatively stable. According 
to the Programme, the general government debt-to-GDP ratio is expected to decrease 
by 2025, specifically with a decrease to 65¾% in 2024, and a decline to 65% in 2025. 
Based  on  the  Commission’s  analysis,  debt  sustainability  risks  appear  low  over  the 
medium term. 

(22)  Ageing, and a tightening labour market, will greatly affect Germany in the next years. 
The  statutory  retirement  age  will  reach  67  years  in  2031,  but  more  adjustments  are 
needed to  ensure sustainability of the pension system  in  the long run. Stronger work 
incentives  would  be  needed  also  in  view  of  a  tightening  labour  market.  The 
government’s commitment to maintaining a cap on the pension contribution rate and a 
minimum income replacement rate (Doppelte Haltelinie) implies a need for significant 
fiscal transfers, increasing further the burden on younger generations. State-subsidised 
private  pensions  (Riester  Rente)  have  failed  to  play  a  substantial  role  in  the  pension 
mix.  The  returns  are  low  and  the  administrative  costs  high.  Low-income  earners  in 
particular cannot achieve sufficient retirement savings. 

(23)  The  tax  system  relies  heavily  on  labour  tax  revenues  while  tax  bases  that  are  less 
harmful  to  inclusive  growth remain underused.  The labour tax wedge in Germany is 

19 

20 

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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(24) 

one of the highest in the EU. This reduces take-home pay and creates disincentives to 
increase hours worked for certain groups such as low- and middle-income earners and 
second  earners;  this  acts  against  better  use  of  the  labour  potential  even  as  labour 
shortages  loom.  Revenues  from  environmental  taxes  are  comparatively  low,  while 
environmentally  harmful  subsidies  (including  tax  reductions  and  tax  exemptions) 
undermine environmental sustainability targets and counteract decarbonisation, energy 
efficiency and renewable energy deployment. 

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  Germany  by  the  Council  in  the 
to  any  country-specific 
European  Semester 
recommendations  issued  up  to  the  date  of  adoption  of  a  plan.  In  particular,  it 
contributes to addressing the need to boost public and private investment, notably for 
the  green  and  digital  transition,  in  sustainable  transport,  in  clean,  efficient  and 
integrated energy systems, in the digitalisation of the public administration and health 
services, in education, and in research and innovation. 

in  2019  and  2020, 

in  addition 

(25)  The  implementation  of  the  recovery  and  resilience  plan  of  Germany  is  expected  to 
contribute  to  making  further  progress  on  the  green  and  digital  transition.  Measures 
supporting  the  climate  objectives  in  Germany  account  for  42%  of  the  plan’s  total 
allocation, while measures supporting digital objectives account for 52% 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  Germany  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 
essential 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. 

(26)  By 4 April 2022,  Germany submitted the cohesion policy programming  documents21 
for all 15 European Regional Development Fund programmes, all 16 European Social 
Fund  Plus  programmes  and  a  mixed  European  Regional  Development  Fund  / 
European  Social  Fund  Plus  programme.  The  Commission  approved  the  Partnership 
Agreement  with  Germany  on  the  use  of  cohesion  policy  funds  on  19  April  2022  .In 
line with Regulation (EU) 2021/1060 of the European Parliament and of the Council 
of  24  June  2021,  Germany  has  taken  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 

21 

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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to  investment  to  support  the  green  and  digital  transition  and  balanced  territorial 
development.  

(27)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Germany  is  still  lagging  in  deploying  very  high-capacity  broadband  in  rural 
areas, where stronger investment has the potential to improve productivity growth and 
the  savings-investment  imbalance.  Overall,  Germany  significantly  improved  very 
high-capacity  broadband  coverage  over  the  last  year  and  is  currently  above  the  EU 
average.  However,  in  rural  areas  the  coverage  was  22.5%,  below  the  EU  average  of 
37.1%. At the same time, only 15.4% of households have access to a fibre connection 
(compared  with an EU average of  50%), which  places Germany  among the Member 
States  with  the  lowest  fibre  coverage,  while  the  top  five  EU  performers  have  fibre 
coverage  of at  least  85%.  The lack of fibre  connections is  accentuated in  rural areas 
(11.3% versus 33.8% EU average). This holds back productivity growth, especially by 
small and medium-sized businesses, many of which are located in rural and semi-rural 
areas.  Broadband  expansion  and  5G  are  not  covered  in  Germany’s  recovery  and 
resilience  plan.  There  are  schemes  at  federal  and  regional  level  aiming  at  improving 
connectivity  in  grey  areas  and  mobile  connectivity  in  white  spots.  The  coalition 
agreement contains ambitious goals on the nationwide availability of fibre and 5G to 
all  German  households,  while  the  implementation  deadline  still  has  to  be  specified. 
The  increase  in  civil  engineering  planning  and  management  capacity  in  the  private 
sector  and  in  planning  and  implementation  management  in  the  public  sector  will  be 
crucial for timely delivery. Meeting the targets will also require improvements in the 
application  and  permit  granting  procedures  as  well  as  the  standardisation  of 
alternative, less time consuming, installation techniques.  

(28) 

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. 

(29)  Germany  faces  challenges  related  to  its  dependency  on  fossil  fuels  and  on  energy 
imports from Russia as well as to the framework conditions for investment in a fully 
integrated sustainable energy system. According to 2020 data, the dependence on gas 
imports  from  Russia  is  particularly  high  (65%22)  and  higher  than  the  EU  average 
(44%). The dependence on oil imports from Russia is also higher than the EU average 
(34%  in  Germany  compared  with  an  EU  average  of  26%)23.  More  than  half  of 
Germany’s  energy  mix  comes  from  gas  (26%)  and  oil  (35%).  This  dependence  has 
direct implications for Germany’s industry, which represents 35% of the final energy 
consumption  of  natural  gas.  Faster  progress  with  the  expansion  of  transmission  and 
distribution grids and with the deployment of renewable energies is crucial to address 
these challenges, to meet climate and energy targets and to boost investment relative to 
savings.  Stronger  efforts  are  needed  to  diversify  energy  supplies  and  routes,  making 

22 

According to recent data by the German Federal Ministry of Economic Affairs and Climate Action the 
share in total gas imports has decreased to 35%. 

23 
Eurostat (2020), share of Russian imports over total imports of natural gas and crude oil. For the EU27 
average, the total imports are based on extra-EU27 imports. For Germany, total imports include intra-EU trade. 
Crude oil does not include refined oil products. 

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use of all available carbon-free sources of energy, in particular through the deployment 
of  renewable  electricity  and  gases,  including  renewable  hydrogen,  and  of  liquefied 
natural  gas.  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.  Further  increase  in 
ambition for reducing greenhouse gas emissions and increasing renewables and energy 
efficiency  will  be  needed  for  Germany  to  be  in  line  with  the  ‘Fit  for  55’  objectives. 
Efforts  are  needed  to  accelerate  decarbonisation  of  the  industry,  improve  flexibility 
options  and  the  response  by  energy  consumers  to  varying  prices,  and  strengthen 
energy system integration24. Action should also be taken to increase energy efficiency 
and  reduce  energy  consumption,  and  to  accelerate  decarbonisation  of  the  building 
stock,  and  the  transport  sector,  which  in  2021  failed  to  meet  the  annual  national 
emission  targets  for  these  sectors.  Greater  uptake  of  shared  mobility  and  sustainable 
public  transport  can  reduce  fossil  fuel  consumption.  The  expansion  of  Germany’s 
electricity  networks  has  suffered  from  significant  delays.  Key  obstacles  are,  among 
others,  the  complexity  and  length  of  planning,  permit  and  appeal  procedures.  The 
delays  in  the  expansion  of  electricity  networks  have  made  it  necessary  to  curtail 
renewables  in  certain  areas.  Furthermore,  the  delays  in  extending  electricity  grids 
significantly  affect  the  networks  of  neighbouring  Member  States  since  network 
capacity within Germany is not sufficient to transport the volumes of electricity traded 
within  the  respective  price  zone.  The  government  has  committed  to  increasing  the 
share of renewables in electricity generation to 80% by 2030 and to almost 100% by 
2035. However, renewable deployment, in particular onshore wind, has suffered from 
a significant slowdown in recent years due to persisting implementation barriers. The 
removal of implementation barriers includes taking steps to solve conflicts over land 
use  at  an  early  stage,  easing  minimum  distance  rules,  improving  the  use  of  spatial 
planning to identify zones for wind energy deployment, and making it easier to obtain 
permits.  Local  acceptance  can  be  improved,  including  through  a  more  streamlined 
consultation process, increased citizens’ participation and revenue sharing in projects. 
The  expansion  of  renewables  and  the  increase  in  energy  efficiency  will  not  only 
reduce energy imports dependency but also significantly lower energy prices. Finally, 
participation  in  energy-related  cross-border  cooperation  can  be  further  strengthened, 
and  flexibility  and  reverse  flow  capacity  can  be  increased  when  it  comes  to  existing 
interconnectivity. 

(30)  While  the  acceleration  of  the  transition  towards  climate  neutrality  and  away  from 
fossil fuels will create significant restructuring costs in  several sectors, Germany 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,  Germany  can  make  use  of  the  European  Social  Fund  Plus  to  improve 
employment opportunities and strengthen social cohesion. 

(31) 

(32) 

In  the  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2022 
Stability Programme and its opinion25 is reflected in recommendation (1) below. 

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  Economic  and  Monetary 
Union,  the  Council  recommended  that  the  euro  area  Member  States  take  action, 

24 

25 

Energy  system  integration  links  the  various  energy  carriers  with  each  other  and  with  the  end-use 
sectors. 
Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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through 

including 
the 
recommendation  on  the  economic  policy  of  the  euro  area.  For  Germany,  this  is 
reflected in particular in recommendations (1), (2), (3) below. 

resilience  plans, 

recovery  and 

implement 

their 

to 

(33) 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined  the  2022  National  Reform  Programme  and  the  2022  Stability  Programme. 
Its recommendations under Article 6 of Regulation (EU) No 1176/2011  are reflected 
in  recommendations  (1),  (2),  (3),  (4)  below.  The  recommendations  (1),  (2),  (3)  also 
contribute  to  the  implementation  of  the  Recommendations  for  the  euro  area,  in 
particular  the  first  and  the  fourth  of  the  euro  area  recommendations.  Fiscal  policies 
referred to in recommendation (1) and policies referred to in recommendations (2), (3) 
and (4) help inter alia address imbalances linked to the current  account  surplus in as 
much as higher investment is concerned. 

HEREBY RECOMMENDS that Germany 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.  Improve  the  tax  mix  for  more  inclusive  and 
sustainable  growth,  in  particular  by  improving  tax  incentives  to  increase  hours 
worked. Safeguard the long-term 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  13  July 
2021.  Swiftly  finalise  the  negotiations  with  the  Commission  of  the  2021-2027 
cohesion  policy  programming  documents  with  a  view 
their 
implementation.  

to  starting 

Remove  investment  obstacles  and  boost  investment  in  very  high-capacity  digital 
communication networks.  

Reduce  overall  reliance  on  fossil  fuels  and  diversify  their  imports  by  improving 
energy  efficiency,  incentivising  energy  savings,  diversifying  energy  supplies  and 
routes, removing investment bottlenecks, further streamlining permitting procedures, 
boosting investment  in and accelerating the deployment of  electricity networks  and 
renewable energy, and further advancing participation in energy-related cross-border 
cooperation. 

Done at Brussels, 

For the Council 
The President 

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