Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Hungary and delivering a Council opinion on the 2023 Convergence Programme of Hungary
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Hungary, economic policy, economic recovery, economic reform, energy policy, green economy, investment, labour market, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 617 final  Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Hungary and delivering a Council opinion on the 2023 Convergence Programme of Hungary {SWD(2023) 617 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2023 National Reform Programme of Hungary and delivering a Council opinion 
on the 2023 Convergence Programme of Hungary 

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 Article 9(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 to the Member 
States  for  the  implementation  of  reforms  and  investments,  entailing  a  fiscal  impulse 
financed  by  the  EU.  In  line  with  the  European  Semester  priorities,  it  contributes  to 
economic  and  social  recovery  and  to  the  implementation  of  sustainable  reforms  and 
investments,  in  particular  to  promote  the  green  and  digital  transition  and  make  the 
Member States’ economies more resilient. It also helps strengthen public finances and 
boost  growth  and  job  creation  in  the  medium  and  long  term,  improve  territorial 
cohesion  within  the  EU  and  support  the  continued  implementation  of  the  European 
Pillar of Social Rights. The maximum financial contribution per Member State under 
the Recovery and Resilience Facility was updated on 30 June 2022, in accordance with 
Article 11(2) of Regulation (EU) 2021/241.  

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 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

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(2) 

On 22 November 2022, the Commission adopted the 2023 Annual Sustainable Growth 
Survey4,  marking  the  start  of  the  2023  European  Semester  for  economic  policy 
coordination. The European Council endorsed the priorities of the survey around the 
four  dimensions  of  competitive  sustainability  on  23  March  2023.  On  22  November 
2022,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted 
the  2023  Alert  Mechanism  Report,  in  which  it  identified  Hungary  as  one  of  the 
Member States that may be affected or may be at risk of being affected by imbalances, 
and for which an in-depth review would be needed. The Commission also adopted a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which the Council adopted on 16 May 2023, as well as the proposal for the 2023 
Joint  Employment  Report  analysing 
the  Employment 
the 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  the 
Council adopted on 13 March 2023.  

implementation  of 

(3)  While the EU economies  are showing remarkable resilience, the  geopolitical  context 
continues  to  have  a  negative  impact.  As  the  EU  stands  firmly  with  Ukraine,  the  EU 
economic  and  social  policy  agenda  is  focused  on  reducing  the  negative  impact  of 
energy shocks on both vulnerable households and companies in the short term, and on 
keeping  up  efforts  to  deliver  on  the  green  and  digital  transition,  support  sustainable 
and inclusive growth, safeguard macroeconomic stability and increase resilience in the 
medium  term.  It  also  focuses  heavily  on  increasing  the  EU’s  competitiveness  and 
productivity. 

(4) 

On  1  February  2023,  the  Commission  issued  the  Communication  A  Green  Deal 
Industrial Plan for the Net-Zero Age5 to boost the competitiveness of the EU's net-zero 
industry  and  support  the  fast  transition  to  climate  neutrality.  The  Plan  complements 
ongoing efforts under the European Green Deal and REPowerEU. It aims to provide a 
more supportive environment for scaling up the EU’s manufacturing capacity for the 
net-zero  technologies  and  products  required  to  meet  the  EU’s  ambitious  climate 
targets,  as  well  as  ensuring  access  to  relevant  critical  raw  materials,  including  by 
diversifying sourcing, properly exploiting geological resources in Member States and 
maximising  the  recycling  of  raw  materials.  The  plan  is  based  on  four  pillars:  a 
predictable  and  simplified  regulatory  environment,  speeding  up  access  to  finance, 
enhancing  skills,  and  open  trade  for  resilient  supply  chains.  On  16  March  2023,  the 
Commission  also  issued  the  Communication  Long-term  competitiveness  of  the  EU: 
looking  beyond  20306,  structured  along  nine  mutually  reinforcing  drivers  with  the 
objective  to  work  towards  a  growth  enhancing  regulatory  framework.  It  sets  policy 
priorities  aimed  at  actively  ensuring  structural 
improvements,  well  focused 
investments and regulatory measures for the long-term competitiveness of the EU and 
its Member States. The recommendations below help to address those priorities. 

(5) 

In 2023, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  Fully 
implementing  the  recovery  and  resilience  plans  remains  essential  for  delivering  the 
policy priorities under the European Semester, as the plans address all or a significant 
subset  of  the  relevant  country-specific  recommendations  issued  in  recent  years.  The 
2019, 2020 and 2022 country-specific recommendations remain equally relevant also 

4 
5 
6 

COM(2022) 780 final. 
COM(2023) 62 final.  
COM(2023) 168 final.  

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(6) 

(7) 

for  recovery  and  resilience  plans  revised,  updated  or  amended  in  accordance  with 
Articles 14, 18 and 21 of Regulation (EU) 2021/241.  
The REPowerEU Regulation7, adopted on 27 February 2023, aims to rapidly phase out 
the  EU’s  dependency  on  Russian  fossil  fuel  imports.  This  will  contribute  towards 
energy security and the diversification of the EU’s energy supply, while increasing the 
uptake of renewables, energy storage capacities and energy efficiency. The Regulation 
enables  Member  States  to  add  a  new  REPowerEU  chapter  to  their  national  recovery 
and  resilience  plans  in  order  to  finance  key  reforms  and  investments  that  will  help 
achieve the REPowerEU objectives. They will also help boost the competitiveness of 
EU’s net-zero industry as outlined in the Green Deal Industrial Plan for the Net-Zero 
Age  and  address  the  energy-related  country-specific  recommendations  issued  to  the 
Member States in 2022 and, where applicable, in 2023. The REPowerEU Regulation 
introduces  a  new  category  of  non-repayable  financial  support,  made  available  to 
Member  States  to  finance  new  energy-related  reforms  and  investments  under  their 
recovery and resilience plans.  

On 8 March 2023, the Commission adopted a communication providing fiscal policy 
guidance for 2024. It aims to support the preparation of Member States’ stability and 
thereby  strengthen  policy  coordination8.  The 
convergence  programmes  and 
Commission recalled that the general escape clause of the Stability and Growth Pact 
will be deactivated at  the end of 2023.  It  called  for fiscal  policies in  2023-2024 that 
ensure  medium-term  debt  sustainability  as  well  as  raise  potential  growth  in  a 
sustainable manner. Member States were invited to set out in their 2023 stability and 
convergence programmes how their fiscal plans will ensure that the 3% of GDP deficit 
reference value is adhered to as well as plausible and continuous debt reduction, or for 
debt  to  be  kept  at  prudent  levels  in  the  medium  term.  The  Commission  invited 
Member States to phase out national fiscal measures introduced to protect households 
and  firms  from  the  energy  price  shock,  starting  with  the  least  targeted  ones.  It 
indicated that, if support measures needed to be extended because of renewed energy 
price  pressures,  Member  States  should  target  such  measures  much  better  than  in  the 
past  towards  vulnerable  households  and  firms.  The  Commission  proposed  that  the 
fiscal  recommendations would be quantified and differentiated and be formulated on 
the basis of net primary expenditure, as proposed in its Communication on orientations 
for  a  reform  of  the  EU  economic  governance  framework9.  It  recommended  that  all 
Member States should  continue to  protect  nationally  financed investment and ensure 
the  effective  use  of  the  Recovery  and  Resilience  Facility  and  other  EU  funds,  in 
particular  in  light  of  the  green  and  digital  transition  and  resilience  objectives.  The 
Commission  indicated  that  it  will  propose  to  the  Council  to  open  deficit-based 
excessive deficit procedures in spring 2024 on the basis of the outturn data for 2023, in 
line with existing legal provisions. 

(8) 

On  26  April  2023,  the  Commission  presented  legislative  proposals  to  implement  a 
comprehensive reform of the EU’s economic governance rules. The central objective 

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9 

Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1). 
Communication  from  the  Commission  to  the  Council:  Fiscal  policy  guidance  for  2024,  8.3.2023, 
COM(2023) 141 final. 
COM(2022) 583 final. 

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(9) 

of the proposals is to strengthen public debt sustainability and promote sustainable and 
inclusive growth in all Member States through reforms and investments. The proposals 
aim at providing Member States with more control over the design of their medium-
term plans, while putting in place a more stringent enforcement regime to ensure that 
Member  States  deliver  on  the  commitments  undertaken  in  their  medium-term  fiscal-
structural plans. The objective is to conclude the legislative work in 2023. 

On 11 May 2021, Hungary 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  15 
December 2022, the Council adopted its Decision on the approval of the assessment of 
the  recovery  and  resilience  plan  for  Hungary10.  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  Hungary  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  2023,  Hungary  submitted  its  2023  National  Reform  Programme  and  its 
2023  Convergence  Programme,  in  line  with  Article  8(1)  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 
2023  National  Reform  Programme  also  reflects  Hungary’s  biannual  reporting  on  the 
progress made in achieving its recovery and resilience plan.  

(11)  The Commission published the 2023 country report for Hungary11 on 24 May 2023. It 
relevant  country-specific 
in  addressing 
assessed  Hungary’s  progress 
recommendations adopted by the Council between 2019 and 2022, and took stock of 
Hungary’s implementation of the recovery and resilience plan. 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.  It  also  assessed  Hungary’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.  

the 

(12)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No 1176/2011 for Hungary and published its results on  24 May 202312. It concluded 
that Hungary is experiencing macroeconomic imbalances. In particular, vulnerabilities 
related  to  very  strong  price  pressures  and  external  and  government  financing  needs 
have  increased  and  are  significant.  Inflation  has  risen  significantly  and  has  not  yet 
started moderating visibly. Should inflation remain elevated for an extended period, it 
would  further  undermine  cost  competitiveness  and  could  leave  financing  costs 
elevated. The large current account deficit was strongly increased by the higher energy 
prices  in  2022,  and  short-term  external  debt  has  risen.  Improvements  in  the  current 

10 

11 
12 

Council  Implementing  Decision  of  15  December  2022  on  the  approval  of  the  assessment  of  the 
recovery and resilience plan for Hungary (ST 15447/22; ST 15447/22 ADD 1). 
SWD(2023) 617 final. 
SWD(2023) 639 final. 

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account this year and next hinge on the expected further moderation of energy prices, 
but  the  current  account  deficit  is  nonetheless  forecast  to  remain  non-negligeable  in 
2023  and  2024.  The  high  energy  intensity  of  the  economy  is  important  for  current 
account  dynamics.  The  government  deficit  has  been  large,  only  partly  driven  by  the 
policy responses to the pandemic and the energy crises, and accounts for much of the 
external  borrowing  of  the  economy.  The  government  debt  ratio  decreased  thanks  to 
marked nominal GDP growth, but that may be challenged by a slowdown in activity 
and  the  persistence  of  high  deficits.  Sovereign  borrowing  costs  have  increased  since 
2021, and the government is facing an increasing interest burden, while debt maturity 
is still relatively low. House prices doubled over five years but price increases halted 
in  late  2022.  However,  the  likelihood  of  a  substantial  nominal  price  drop  seems 
limited amid low household indebtedness, and also in light of the current high inflation 
environment.  Policy  inconsistencies  have  exacerbated  the  identified  vulnerabilities. 
Effective coordination and clear demarcation of macroeconomic policies, underpinned 
by  a  strong  institutional  policy  framework,  is  instrumental  to  safeguard  fiscal  and 
external  sustainability  as  well  as 
to  anchor  expectations.  Timely  and  full 
implementation of structural reforms included in Hungary’s Recovery and Resilience 
Plan is expected to help reduce macroeconomic vulnerabilities and support growth and 
adjustment in the medium term. 

(13)  Based  on  data  validated  by  Eurostat,13  Hungary’s  general  government  deficit 
decreased from 7.1% of GDP in 2021 to 6.2% in 2022, while general government debt 
fell from 76.6% of GDP at the end of 2021 to 73.3% at the end of 2022. On 24 May 
2023,  the  Commission  published  a  report  under  Article  126(3)  TFEU;14  the  report 
discussed  the  budgetary  situation  of  Hungary,  as  its  general  government  deficit  in 
2022 exceeded the 3% of GDP Treaty reference value. The report concluded that the 
deficit criterion was not fulfilled. In line with the Communication of 8 March 2023,15 
the  Commission  did  not  propose  to  open  new  excessive  deficit  procedures  in  spring 
2023;  in  turn,  the  Commission  stated  that  it  would  propose  to  the  Council  to  open 
deficit-based excessive deficit procedures in  spring 2024, on the basis of the outturn 
data for 2023. Hungary should take account of this in the execution of its 2023 budget 
and in preparing its budget for 2024. 

(14)  The  general  government  balance  has  been  impacted  by  the  fiscal  policy  measures 
adopted to mitigate the economic and social impact of the increase in energy prices. In 
2022, such revenue-decreasing measures included a cut in excise duties on fuels; while 
such expenditure-increasing measures included subsidies to  utility companies for the 
losses  incurred  due  to  caps  on  residential  energy  prices,  and  support  schemes  for 
energy-intensive companies. The cost of these measures was partly offset by new taxes 
on windfall profits of energy producers and suppliers, namely a temporary tax on the 
spread between Brent and Urals oil, a temporary tax on the income of energy suppliers 
and  a  temporary  increase  in  mining  royalty.  The  Commission  estimates  the  net 
budgetary  cost  of  these  measures  at  1.0%  of  GDP  in  2022.  The  general  government 
balance  has  also  been  impacted  by  the  budgetary  cost  of  temporary  protection  to 
displaced persons from  Ukraine, which is estimated at 0.1% of GDP in 2022. At the 
same time, the estimated cost of COVID-19 temporary emergency measures dropped 
to 0.1% of GDP in 2022, from 1.9% in 2021. 

13 
14 
15 

Eurostat-Euro Indicators, 47/2023, 21.4.2023. 
COM(2023) 631 final, 24.5.2023. 
COM(2023) 141 final, 8.3.2023. 

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(15)  On  18  June  2021,  the  Council  recommended  that  in  2022  Hungary16  maintain  a 
supportive  fiscal  stance,  including  from  the  impulse  provided  by  the  Recovery  and 
Resilience Facility, and preserve nationally financed investment.  

(16)  According to the Commission estimates, the fiscal stance17 in 2022 was supportive, at 
-0.4%  of  GDP,  as  recommended  by  the  Council.  As  recommended  by  the  Council, 
Hungary  continued  to  support  the  recovery  with  investments  to  be  financed  by  the 
Recovery  and  Resilience  Facility.  Expenditure  financed  by  Recovery  and  Resilience 
Facility grants and other EU funds amounted to 1.5% of GDP in 2022 (2.1% of GDP 
in 2021). The decrease in expenditures financed by Recovery and Resilience Facility 
grants  and  other  EU  funds  in  2022  was  due  to  lower  absorption  of  the  European 
structural  and 
investment  provided  a 
contractionary  contribution  of  0.2  percentage  points  to  the  fiscal  stance.18  Hungary 
therefore did not preserve nationally financed investment, which is not in line with the 
Council recommendation. At the same time, the growth in nationally financed primary 
current  expenditure  (net  of  new  revenue  measures)  provided  a  contractionary 
contribution  of  0.6  percentage  points  to  the  fiscal  stance.  Hungary  therefore 
sufficiently kept under control the growth in nationally financed current expenditure. 

investment  funds.  Nationally  financed 

(17)  The  macroeconomic  scenario  underpinning 

the  budgetary  projections 

the 
Convergence Programme is favourable. The government projects real GDP to grow by 
1.5% in 2023 and 4.0% in 2024. By comparison, the Commission 2023 spring forecast 
projects a lower real GDP growth of 0.5% in 2023 and 2.8% in 2024, mainly due to 
expected  lower  growth  in  private  consumption  driven  by  lower  expected  growth  in 
nominal wages and slightly higher unemployment rate. The Commission also projects 
lower growth in government consumption and net exports. The nominal GDP growth 
projected  in  the  Commission  forecast  is  lower  over  the  forecast  horizon  due  to  the 
lower expected GDP growth and GDP deflator.  

in 

(18) 

In  its  2023  Convergence  Programme,  the  government  expects  that  the  general 
government deficit ratio will decrease to 3.9% of GDP in 2023. The decrease in 2023 
mainly reflects higher tax revenue driven by the high inflation and temporary windfall 
profit  and  sectoral  taxes  estimated  at  1.5%  of  GDP  in  2023.  According  to  the 
Programme,  the  general  government  debt-to-GDP  ratio  is  expected  to  decrease  from 
73.3% at the end of 2022 to 69.7% at the end of 2023. The Commission 2023 spring 
forecast projects a government deficit of 4.0% of GDP for 2023. This is in line with 
the  deficit  projected  in  the  Convergence  Programme.  The  Commission  2023  spring 
forecast projects a higher general government debt-to-GDP ratio, of 70.7% at the end 
of  2023.  The  difference  is  due  to  lower  GDP  growth  and  GDP  deflator  in  the 
Commission forecast. 

16 

17 

18 

Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Convergence 
Programme of Hungary, OJ C 304, 29.07.2021, p. 78. 
The  fiscal  stance  is  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, 
in 
relative 
the Fiscal Statistical Tables. 
Other nationally financed capital expenditure provided an expansionary contribution of 1.7 percentage 
points  of  GDP,  which  is  driven  by  the  impact  of  the  purchase  of  gas  stockpiles  by  a  special  entity 
classified in the general government. 

growth. For  more 

to  medium-term 

see  Box 1 

potential 

details 

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(19)  The  government  balance  in  2023  is  expected  to  continue  to  be  impacted  by  the 
measures adopted to mitigate the economic and social impact of the increase in energy 
prices. They consist of measures extended from 2022 in particular: subsidies to utility 
companies for the losses incurred due to caps on residential energy prices and support 
schemes for energy-intensive companies.  The cost of these measures continues to be 
partly  offset  by  the  taxes  on  windfall  profits  of  energy  suppliers.  Taking  these 
revenues into account, the net budgetary cost of the support measures is projected in 
the Commission 2023 spring forecast at 1.2% of GDP in 202319. The measures in 2023 
do not appear targeted to the most vulnerable households or firms, and most of them 
do  not  fully  preserve  the  price  signal  to  reduce  energy  demand  and  increase  energy 
efficiency. As a result, no targeted support measures are to be taken into account in the 
assessment of compliance with the recommendation for 2023.  

(20)  On  12  July  2022,  the  Council  recommended20  that  Hungary  take  action  to  ensure  in 
2023 that the growth of nationally financed primary current expenditure is in line with 
an  overall  neutral  policy  stance21,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and to 
people fleeing Ukraine. Hungary should stand ready to adjust current spending to the 
evolving  situation.  Hungary  was  also  recommended  to  expand  public  investment  for 
the  green  and  digital  transitions,  and  for  energy  security  taking  into  account  the 
REPowerEU  initiative,  including  by  making  use  of  the  Recovery  and  Resilience 
Facility and other Union funds.  

(21) 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
contractionary  (+4.2%  of  GDP),  in  a  context  of  high  inflation.  This  follows  an 
expansionary fiscal stance in 2022 (-0.4% of GDP). The growth in nationally financed 
primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected to provide a contractionary contribution of 2.2% of GDP to the fiscal stance. 
Therefore, the projected growth of nationally financed primary current expenditure is 
in  line  with  the  Council  recommendation.  Expenditure  financed  by  Recovery  and 
Resilience Facility grants and other EU funds is projected to amount to 2.3% of GDP 
in 2023, while nationally financed investment is projected to provide a contractionary 
contribution to the fiscal stance of 0.6 percentage points. 22 Therefore, Hungary plans 
to  finance  additional  investment  through  the  Recovery  and  Resilience  Facility  and 
other EU funds, although it is not projected to preserve nationally financed investment. 
It  plans  to  finance  public  investment  for  the  green  and  digital  transitions,  and  for 
energy  security,  such  as  development  of  electricity  grid,  modernisation  of  suburban 
railways, support for the use of residential solar panels, provision of laptops to pupils 
in lower secondary schools and digitalisation measures in healthcare, which are funded 
by the Recovery and Resilience Facility and other EU funds.  

19 

20 

21 

22 

The  figure represents the level of annual budgetary cost of those  measures, including current revenue 
and expenditure as well as – where relevant – capital expenditure measures. 
Council  Recommendation  of  12  July  2022  on  the  National  Reform  Programme  of  Hungary  and 
delivering  a  Council  opinion  on  the  2022  Convergence  Programme  of  Hungary,  OJ  C  334.17, 
12.07.2022, p. 136. 
Based  on  the  Commission  spring  2023  forecast,  the  medium-term  (10-year  average)  potential  output 
growth of Hungary, which is used to measure the fiscal stance, is estimated at 16.6% in nominal terms. 
Other nationally financed capital expenditure is projected to provide a contractionary contribution of 2.2 
percentage points of GDP. The large fall in other capital expenditure in 2023 is related the large impact 
of the purchase of gas stockpiles by a special governmental entity classified in the general government 
in 2022. 

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(22)  According to the Convergence Programme the general government deficit is expected 
to  decrease  to  2.9%  of  GDP  in  2024.  The  decrease  in  2024  mainly  reflects  a 
significant reduction in general government spending as a share of GDP, in particular 
on  gross  fixed  capital  formation,  intermediate  consumption  and  compensation  of 
employees.  The  programme  expects  the  general  government  debt-to-GDP  ratio  to 
decrease to 66.7% at the end of 2024. Based on policy measures known at the cut-off 
date  of  the  forecast,  the  Commission  2023  spring  forecast  projects  a  government 
deficit  of  4.4%  of  GDP  in  2024.  This  is  higher  than  the  deficit  projected  in  the 
programme,  mainly  due  to  higher  projected  expenditure  on  gross  fixed  capital 
formation  in  line  with  recent  trends  and  higher  intermediate  consumption  driven  by 
lingering  inflationary  pressures.  The  Commission  2023  spring  forecast  projects  a 
higher general government debt-to-GDP ratio, of 71.1% at the end of 2024.  

(23)  The Convergence Programme envisages the phasing out of some of the energy support 
measures in 2024. The Commission currently assumes the net cost of energy support 
measures  at  0.4%  of  GDP  in  2024,  compared  to  1.2%  of  GDP  in  2023.  These 
estimates hinge upon the assumption of no renewed energy price increases. The energy 
support measures that are currently planned to remain in place in 2024 do not appear 
targeted to vulnerable households or firms. They do not fully preserve the price signal 
to reduce energy demand and increase energy efficiency.  

(24)  Council Regulation (EC) No 1466/97 calls for an annual improvement in the structural 
budget balance toward the medium-term objective by 0.5% of GDP as a benchmark.23 
Taking  into  account  fiscal  sustainability  considerations24  and  the  need  to  reduce  the 
deficit  to  below  the  3%  of  GDP  reference  value,  an  improvement  in  the  structural 
balance  of  at  least  0.5%  of  GDP  for  2024  would  be  appropriate.  To  ensure  such  an 
improvement,  the  growth  in  net  nationally  financed  primary  expenditure25  in  2024 
should not exceed 4.4%, as reflected in this recommendation. This will also contribute 
to reducing core inflation, which is well above the EU average, and which could lead 
to competitiveness losses if persistent, and to safeguarding the external position. 

At the same time, the remaining energy support measures (currently estimated by the 
Commission  at  1.2% of  GDP in  2023) should be phased out, contingent  on energy 
market  developments  and  starting  from  the  least  targeted  ones,  and  the  related 
savings  should  be  used  to  reduce  the  government  deficit.  Based  on  Commission 
estimates,  this  would  lead  to  a  growth  in  net  primary  expenditure  lower  than 
recommended for 2024. 

(25)  Assuming  unchanged  policies,  the  Commission  2023  spring  forecast  projects  net 
nationally financed primary expenditure to grow at 7.0% in 2024, which is above the 
recommended  growth  rate.  The  adjustment  projected  in  the  Commission  forecast  is 
less  than  the  savings  from  the  full  phasing  out  of  energy  support  measures  which  is 

23 

24 

25 

Cf. Article 5 of Council Regulation (EC) No 1466/97, which also requires an adjustment of more than 
0.5%  of  GDP  for  Member  States  with  a  government  debt  exceeding  60%  of  GDP,  or  with  more 
pronounced debt sustainability risks. 
The  Commission  estimated  that  Hungary  would  need  an  average  annual  increase  in  the  structural 
primary  balance  as  a  share  of  GDP  of  0.9  percentage  points  to  achieve  a  plausible  debt  reduction  or 
ensure that government debt is kept at prudent levels in the medium term. This estimate was based on 
the  Commission  autumn  2022  forecast.  The  starting  point  for  this  estimate  was  the  projected 
government  deficit  and  debt  for  2024  which  assumed  the  withdrawal  of  energy  support  measures  in 
2024.  
Net  primary  expenditure  is  defined  as  nationally  financed  expenditure  net  of  discretionary  revenues 
measures and excluding interest expenditure as well as cyclical unemployment expenditure. 

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due  to  elevated  expenditure  on  intermediate  consumption  and  gross  fixed  capital 
formation  and  the  expected  phaseout  of  the  temporary  windfall  profit  and  sectoral 
taxes. 

(26)  According  to  the  programme,  government  investment  is  expected  to  decrease  from 
5.1% of GDP in 2023 to 3.7% of GDP in 2024. The lower investment reflects lower 
nationally financed investment and lower investment financed by the EU. 

(27)  The  Convergence  Programme  outlines  a  medium-term  fiscal  path  until  2027. 
According to the programme, the general government deficit is expected to gradually 
decline  to  1.9%  of  GDP  in  2025,  1.4%  in  2026  and  0.9%  in  2027.  The  general 
government  deficit  is  therefore  planned  to  remain  below  3%  of  GDP  over  the 
programme  horizon.  According  to  the  programme,  the  general  government  debt-to-
GDP ratio is expected to decrease from 66.7% at the end of 2024 to 56.3% by the end 
of 2027. 

(28)  Monetary,  fiscal  and  economic  development  policies  responded  to  recent  economic 
challenges in an uncoordinated way, weakening the effectiveness of the overall policy 
response.  Monetary  policy  started  to  tighten  in  2021  but  fiscal  expansion  continued 
until  early 2022. Several temporary  policy measures introduced since 2021 aimed to 
preserve  households’  purchasing  power  in  an  untargeted  manner,  through  price  and 
interest  rate caps  and fiscally costly energy subsidies. Price caps were introduced on 
motor fuels and certain basic food items. Interest rate caps were introduced on variable 
rate mortgages, loans to small and medium sized enterprises, certain student loans, and 
large  bank  deposits.  Most  of  these  are  due  to  expire  in  2023.  The  cost  of  these 
measures  has  mostly  been  borne  by  companies  and  the  financial  sector,  through 
reduced  revenues  and  higher  indirect  taxes,  and  their  distortive  effects  have 
contributed  to  lower  domestic  production  and  higher  prices  among  products  not 
directly affected by the caps. They have also hindered the adjustment of demand to a 
new economic environment. Economic development policies have relied on subsidised 
loan schemes to help companies adjust to economic shocks. A large, subsidised loan 
scheme with fixed interest rates was launched in February 2023, to support companies 
that face  rising  energy  costs. The price  and interest  rate caps and subsidised lending 
have  counteracted  monetary  policy  efforts  to  reduce  inflation,  inter  alia  by  reducing 
the  effectiveness  of  the  central  bank’s  instruments.  The  European  Central  Bank  has 
found that certain regulatory measures, including the cap on bank deposit rates impede 
the conduct of an efficient monetary policy26. 

(29)  Weaknesses in budget planning and execution have increased the expansionary bias of 
fiscal  policy  and  have  therefore  contributed  to  many  of  Hungary’s  current 
macroeconomic challenges. Since 2016, the very early adoption of annual budgets has 
reduced  the  quality  of  the  macroeconomic  and  budgetary  forecasts.  Various  budget 
flexibility  rules  and  large  budget  reserves  allowed  for  higher  discretionary  spending, 
which exacerbated the procyclicality of fiscal policy. Ad hoc spending decisions were 
often  made  at  the  end  of  the  budget  year  or  were  enacted  by  government  decrees 
throughout the year without adequate parliamentary oversight and public consultation, 
in turn reducing budget transparency. The national fiscal framework has not prevented 

26 

Opinion of the European Central Bank of 26 April 2023 on the restriction of the negotiability of 
discount bills issued by the Magyar Nemzeti Bank and the extension of an interest rate cap. 
CON/2023/10. (https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:52023AB0010&qid=1682527131068). 

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high  public  deficits  due  to  shortcomings  in  the  design  of  domestic  fiscal  rules, 
including a debt rule with procyclical features, the weak enforcement of medium-term 
budget  planning,  further  eroded  by  the  special  provisions  of  the  “state  of  danger” 
regime,  and  the  limited  role  and  resources  of  the  Fiscal  Council.  The  national  fiscal 
council’s  limited  mandate  and  resources  limit  its  effectiveness  in  steering  public 
discussions on fiscal issues. 

(30)  House prices have grown strongly in Hungary in the last decade, while housing supply 
remained limited. Weakly targeted subsidy schemes for home purchase, also available 
for  higher  income  households  already  in  possession  of  a  dwelling,  contributed  to 
recent price increases. Subsidies on housing construction, including grants, subsidised 
loans and preferential VAT rates, are similarly untargeted.  

(31) 

In accordance with Article 19(3), point (b) and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026.  In accordance with 
Article 14(6) of Regulation (EU) 2021/241, Hungary expressed its intention to request 
up  to  EUR  6 600 000 000  of  additional  loan  support  under  the  Recovery  and 
Resilience Facility. Proceeding swiftly with the implementation of the plan is essential 
due  to  the  temporary  nature  of  the  Recovery  and  Resilience  Facility  in  place  until 
2026.  It  is  equally  important  for  Hungary  to  ensure  an  adequate  administrative 
capacity  to  deliver  on  the  commitments  of  the  plan.  The  swift  inclusion  of  the  new 
REPowerEU chapter in the recovery and resilience plan will allow additional reforms 
and investments to be financed in support of Hungary’s strategic objectives in the field 
of energy and the green transition. The systematic and effective involvement of local 
and  regional  authorities,  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.  Due  to  its  late  adoption  in  December 
2022,  the  implementation  of  Hungary’s  recovery  and  resilience  plan  has  been 
significantly delayed. A swift and steady implementation of the plan would require the 
fulfilment  of  27  milestones  related  to  strengthening  judicial  independence  and 
safeguarding the protection of the financial interests of the Union. No payment under 
the  plan  is  possible  until  these  milestones  are  fully  and  correctly  implemented. 
Hungary’s  REPowerEU  grant  allocation  amounts  to  EUR  701.6  million.  Hungary 
plans to use the REPowerEU grant and additional loan on energy related investments. 

(32)  The Commission approved all of Hungary’s cohesion policy programming documents 
in 2022. Proceeding with the swift implementation of the cohesion policy programmes 
in  complementarity  and  synergy  with  the  recovery  and  resilience  plan,  including  the 
REPowerEU  chapter,  is  key  to  achieving  the  green  and  digital  transition,  increasing 
economic and social resilience, as well as achieving balanced territorial development 
in Hungary. 

(33)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Hungary  faces  a  number  of  additional  challenges  related  to  poverty,  labour 
market competition in services and energy. 

(34)  While the overall poverty indicators have improved over the last decade, the relative 
situation  of  certain  disadvantaged  groups  such  as  low-income  households,  children, 
people  with  disabilities,  Roma  and  people  living  in  remote  rural  settlements  has 
worsened. The severe material and social deprivation rate is one of the highest in the 
EU, with significant disparities between regions. It is especially high among children 

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and  Roma.  Disadvantaged  groups  face  difficulties  in  accessing  adequate  social 
assistance,  education,  healthcare  and  job-seeking  services.  Households  without  a 
stable  income  face  a  weakening  social  safety  net.  The  tax  system  disproportionately 
burdens lower-paid workers. The major sources of income for low-income households 
have not kept up with the cost of living in the last decade. The adequacy of minimum 
income  is  one  of  the  lowest  in  the  EU.  Recent  increases  in  energy  and  food  prices 
disproportionately  burden  low-income  earners,  while  support  measures  are  mainly 
untargeted.  The  recent  amendment  of  the  social  protection  legislation  reduced  the 
state’s responsibility to provide social care. 

(35)  The  headline  employment  rate  is  relatively  high,  but  certain  disadvantaged  groups 
such as Roma, low-skilled people, women with caring responsibilities and people with 
disabilities have difficulties in entering the open labour market due to the weaknesses 
in education, training, social assistance systems and support structures for jobseekers. 
The  employment  rate  gaps  for  the  low-skilled,  Roma  and  people  with  disabilities 
remain persistently  high. One in  five women seeking paid  employment is left  out  of 
the  labour  market  due  to  caring  responsibilities  for  children  or  dependents  with 
disabilities.  Benefits  and  access  to  effective  active  labour  market  measures  for 
disadvantaged groups are inadequate. The duration of the unemployment benefit is 3 
months, while the average time taken to find a job was 16 months in 2022. Four out of 
ten registered unemployed people are without benefits. The long average registration 
period  signals  capacity  challenges  in  the  public  employment  service.  The  share  of 
jobseekers with low basic skills is more than double compared to the national average. 
The share of adults participating in learning remains low, in particular among the low-
skilled and the unemployed. 

(36)  Social  dialogue  remains  among  the  weakest  in  the  EU  and  further  deteriorated 
recently. The main tripartite body serves mainly as an information-sharing forum for 
the  government  and  it  has  no  formal  legal  framework,  with  no  meaningful  dialogue 
except  for  minimum  wage  setting.  While  the  shortage  of  teachers  is  an  increasing 
challenge, new legal provisions have curbed the rights of teachers to collective action 
and  widened  employers’  possibility  to  retroactively  dismiss  teachers  participating  in 
civil  disobedience  to  protest  labour  conditions.  Recent  reforms,  introduced  without 
meaningful dialogue with the relevant unions, negatively affected working conditions 
and weakened self-representation for healthcare workers.  

(37)  Recently, there have been cases of public interference in a number of markets, which 
has  weakened  legal  certainty.  These  interventions  tended  to  discourage  or  limit  EU 
and foreign investment in certain markets, in effect enabling  purchases of companies 
by  state-owned  enterprises  or  private  firms  with  close  ties  to  the  government.  They 
seriously  affect  the principles of the single market  and of the rule of law27,  curbing 
opportunities  for  sustainable  economic  growth.  For  example,  specific  firms  and 
industries  face  discriminatory  treatment  through  tailor-made  taxes,  price  caps  and 
regulations  imposed  at  short  notice  and  without  prior  consultation.  Since  2020,  the 
government  has  also  used  its  extraordinary  power  under  the  ‘state  of  danger’  to 
introduce  such  measures.  Budget  revenues  from  sector-specific  taxes  are  significant. 
For  example,  the  government  recently  imposed  administrative  price  caps  and  a  90% 
profit tax on the production of cement and ceramic materials. These are industries with 
a  high  degree  of  foreign  ownership.  In  December  2022,  the  government  suddenly 

27 

See COM(2020) 580 final, page 1. 

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increased  the  tax  on  insurance  and  pharmaceutical  companies.  Banks  were  burdened 
by  a  cap  on  flexible  mortgage  rates,  impacting  their  ability  to  lend  and  their 
profitability. Selective and arbitrary administrative inspections, fines and withholding 
of permits have been used to exert undue pressure on certain companies, in particular 
in retail and transport. Effective remedy seems to be lacking against arbitrary measures 
taken by the authorities. The retail sector continues to face unpredictable regulations. 
The  conditions  for  authorising  the  establishment  of  or  changes  to  shops  above  400 
square metres do not seem to be transparent, and the availability of judicial review is 
questionable. The tax on the retail sector disproportionately burdens larger companies 
that  do  not  have  their  headquarters  in  Hungary.  The  government  frequently  uses  its 
power to exempt transactions from merger control. The impact of such transactions on 
the economy, competition and the single market is not being assessed. The criteria for 
these  exemptions  are  not  set  out  transparently,  and  there  is  no  formal  procedure  to 
contest these criteria or the decision itself. As a result of these interventions, state or 
state-friendly  domestic  ownership  has  increased  in  banking,  telecommunications, 
utilities,  media,  TV  and  radio  broadcasting,  to  the  detriment  of  foreign  ownership. 
Based on announcements by members of the government, similar transactions can be 
expected in insurance, retail and the transport sector, in particular regarding Budapest 
Airport. The decreased presence of foreign capital and know-how, in particular in high 
value-added industries like banking and telecommunications, risks curbing Hungary’s 
opportunities for productivity growth and innovation. 

(38)  Hungary’s  energy  mix  is  determined  by  oil  and  gas,  each  accounting  for  about  one 
third of overall energy use. Nuclear and renewable energy sources have a share of 15% 
and  about  14%,  respectively.  Hungary  continues  to  rely  heavily  on  Russia  for  fossil 
fuels  as  well  as  nuclear  and  its  efforts  to  shift  away  from  Russian  dependence  are 
slow. Three quarters of domestic gas consumption is covered by imports from Russia. 
In 2021, Hungary signed a long-term gas supply agreement with Gazprom and in April 
2023 renegotiated it, with an option for additional quantities. Decreasing dependency 
on  Russian  fossil  fuels  will  require  significant  additional  action,  in  particular  to 
strengthen  cooperation  with  neighbouring  countries,  including  where  necessary  on 
infrastructure, to ensure access to alternative fossil fuel sources. Electrification and the 
envisaged  investment  in  energy-intensive  industries  will  increase  the  need  for 
electricity  production.  Despite  the  significant  increase  in  solar  energy  capacity  in 
recent  years,  the  share  of  renewable  energy  capacity  is  still  one  of  the  lowest  in  the 
EU. The installation of wind power plants has been on halt and is expected to resume 
after the removal of legal restrictions. Geothermal energy has been underutilised. The 
frequently  changing  regulatory  environment  poses  several  challenges 
the 
development of renewable energy. In addition, the limitations of the electricity grid’s 
capacity  create  a  significant  bottleneck  for  connecting  renewables  to  the  grid,  while 
the lack of flexibility solutions on the demand and supply sides, and limited consumer 
empowerment,  create  a  major  constraint  on  the  development  of  clean,  renewable 
electricity production. Suboptimal integration into the EU balancing market  is  also  a 
missed opportunity to optimise the grid for additional renewables capacity. 

to 

(39)  Hungary  has  significant  potential  in  energy  efficiency,  in  particular  in  residential 
buildings.  Hungary’s  consumption  of  natural  gas  has  dropped  by  20%  in  the  period 
between August 2022 and March 2023, compared with the average gas consumption 
over the same period in the preceding 5 years, beyond the 15% reduction target, also 
due to measures in the public sector and the amendment of the energy price cap system 

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applied for households. Hungary is encouraged to keep pursuing efforts to temporarily 
reduce gas demand until 31 March 202428. Nevertheless, despite these recent changes, 
the administrative prices system on  energy still does  not  allow price signals  to  work 
properly and to create sufficient incentive for energy savings. Price caps are uniformly 
applied  to  all  households.  High-income  households  also  benefit  from  the  subsidised 
administrative  price,  while  low-income  families  often  live  in  less  energy-efficient 
homes. Targeted schemes for low-income households would be more efficient, both in 
supporting vulnerable households and generating energy savings.  

(40)  Labour  and  skills  shortages  in  sectors  and  occupations  key  for  the  green  transition, 
including  manufacturing,  deployment  and  maintenance  of  net-zero  technologies,  are 
creating  bottlenecks  in  the  transition  to  a  net-zero  economy.  High-quality  education 
and  training  systems  that  respond  to  changing  labour  market  needs  and  targeted 
upskilling and reskilling measures are key to reducing skills shortages and promoting 
labour inclusion and reallocation. To unlock untapped labour supply, these measures 
need  to  be  accessible,  in  particular  for  individuals  and  in  sectors  and  regions  most 
affected by the  green transition.  In 2022, labour  shortages were reported  in  Hungary 
for 31 occupations that required specific skills or knowledge for the green transition. 
At  the  same  time,  worker  participation  in  training  in  energy-intensive  industries  has 
significantly declined and is now below the EU average. 

(41) 

(42) 

In  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2023 
Convergence Programme and its opinion29 is reflected in recommendation (1) below.  

In  light  of  the  Commission’s  in-depth  review  and  this  assessment,  the  Council  has 
examined  the  2023  National  Reform  Programme  and  the  2023  Convergence 
Programme.  Its  recommendations  under  Article  6  of  Regulation  (EU)  No  1176/2011 
are reflected in recommendation (1) below. Policies referred to in recommendation (1) 
help  address  vulnerabilities  linked  to  very  strong  price  pressures  and  external  and 
government  financing  needs.  Recommendations  (2)  and  (4)  contribute  to  addressing 
recommendation (1). 

HEREBY RECOMMENDS that Hungary take action in 2023 and 2024 to:  

1. 

Wind  down  the  energy  support  measures  in  force  by  the  end  of  2023  using  the 
related  savings  to  reduce  the  government  deficit.  Should  renewed  energy  price 
increases  necessitate  support  measures,  ensure  that  these  are  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable  and  preserve  incentives  for 
energy savings. 

Ensure  prudent  fiscal  policy,  in  particular  by  limiting  the  nominal  increase  in 
nationally financed net primary expenditure in 2024 to not more than 4.4%.  

Preserve nationally financed public investment and ensure the effective absorption of 
RRF  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  For  the  period  beyond  2024,  continue  to  pursue  a  medium-term  fiscal 
strategy  of  gradual  and  sustainable  consolidation,  combined  with  investments  and 
reforms  conducive to higher sustainable growth, to achieve a prudent medium-term 
fiscal position. 

28 
29 

Council Regulation (EU) 2022/1369. 
Under Articles 5(2) and 9(2) of Council Regulation (EC) No 1466/97. 

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2. 

3. 

4. 

Pursue  effective  coordination  and  clear  demarcation  of  macroeconomic  policies  to 
ensure  fiscal  and  external  sustainability.  Phase  out  price  and  interest  rate  caps  to 
reduce  distortive  effects  and  facilitate  the  smooth  transmission  of  monetary  policy. 
Target support measures in the housing sector to low-income households. Strengthen 
the medium-term budgetary framework, align the preparation of annual budgets with 
the budgetary year, and limit discretion in the implementation of annual budgets.  

Urgently  fulfil  the  required  milestones  and  targets  related  to  strengthening  judicial 
independence and safeguarding the protection of the financial interests of the Union 
in order to allow for a swift and steady implementation of its recovery and resilience 
plan.  Swiftly  finalise  the  REPowerEU  chapter  with  a  view  to  rapidly  starting  its 
implementation.  Proceed  with  the  speedy  implementation  of  cohesion  policy 
programmes, in close complementarity and synergy with the recovery and resilience 
plan. 

Improve  the  adequacy  of  the  social  assistance  system,  including  unemployment 
benefits.  Improve  access  to  effective  active  labour  market  measures,  in  particular 
upskilling  opportunities  for  the  most  disadvantaged  groups,  and  ensure  effective 
social  dialogue.  Improve  the  regulatory  framework  and  competition  in  services  by 
avoiding  selective  and  arbitrary  administrative  interventions  and  the  use  of  tailor-
made legislation providing undue advantage or disadvantage to specific companies, 
by  applying  competition  scrutiny  systematically  to  business  transactions  and  by 
reducing the use of emergency measures to what is strictly necessary, in line with the 
principles of the single market and of the rule of law. 

Reduce overall reliance on fossil fuels by accelerating the deployment of renewables, 
including  wind  energy,  geothermal  and  sustainable  biomethane,  in  particular  by 
streamlining  the  permitting  procedures,  while  conducting  regular  environmental 
impact  assessments  and  by  creating  a  supportive  and  predictable  regulatory 
environment.  Phase  out  subsidies  for  fossil  fuels.  Reform  balancing  energy  market 
rules and tariff setting to allow for cost recovery and an optimum use of the grid and, 
where  necessary,  upgrade  the  electricity  infrastructure,  including  grid  and  storage 
capacities. Diversify imports of fossil fuels to significantly decrease dependence on 
Russia, including by strengthening cooperation with other Member States, including 
where  necessary  on  infrastructure.  Improve  energy  efficiency,  in  particular  in 
buildings, and continue efforts to reduce overall gas consumption. Adjust the current 
system  of  regulated  energy  prices  to  encourage  energy  saving  while  providing 
targeted  support  for  low-income  households.  Step  up  policy  efforts  aimed  at  the 
provision and acquisition of the skills needed for the green transition.   

Done at Brussels, 

For the Council 
The President 

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