Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Germany and delivering a Council opinion on the 2023 Stability Programme of Germany
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Germany, digitisation, economic policy, economic recovery, economic reform, energy policy, fiscal policy, investment, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 605 final  Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Germany and delivering a Council opinion on the 2023 Stability Programme of Germany {SWD(2023) 605 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2023 National Reform Programme of Germany and delivering a Council opinion 
on the 2023 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 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.  

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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  Germany  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. On the same date, the Commission 
also  adopted  an  opinion  on  Germany’s  2023  draft  budgetary  plan.  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  implementation  of  the 
Employment  Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights, 
which the Council adopted on 13 March 2023.  

(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 
improvements,  well  focused 
priorities  aimed  at  actively  ensuring  structural 
investments and regulatory measures for the long-term competitiveness of the EU and 
its Member States. The recommendations below help 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 

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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  dependence  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 
the 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 
of the proposals is to strengthen public debt sustainability and promote sustainable and 

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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). 
COM(2023) 141 final. 
COM(2022) 583 final. 

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(9) 

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 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  Germany10. 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 24 April 2023, Germany submitted its 2023 National Reform Programme and, on 
26 April 2023, its 2023 Stability Programme, in  line with  Article  4(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  Germany’s biannual  reporting on 
the progress made in achieving its recovery and resilience plan.  

(11)  The Commission published the 2023 country report for Germany11 on 24 May 2023. It 
assessed  Germany’s  progress 
relevant  country-specific 
in  addressing 
recommendations  adopted by  the Council  between 2019  and  2022 and  took stock of 
Germany’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  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.  

the 

(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 24 May 202312. It concluded 
that Germany is experiencing macroeconomic imbalances. In particular, the persistent 
large  current  account  surplus,  reflecting  also  subdued  investment  relative  to  savings, 
which has cross-border relevance, has been gradually reduced, most recently amid the 
energy  crisis,  but  is  expected  to  increase  markedly.  The  current  account  surplus 
receded  slowly  until  2019  with  a  gently  increasing  domestic  investment  ratio  and  a 
falling trade balance and has since been marked by unusual economic circumstances. 
It decreased markedly in 2022 on the back of higher import energy prices, along with a 
narrowing of the non-energy trade surplus and a recovery in tourism imports. In 2022, 

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Council Implementing Decision of 13 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Germany (ST 10158/21 and ST 10158/21 ADD 1). 
SWD(2023) 605 final. 
SWD(2023) 629 final. 

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the surplus remained above the levels suggested by the country's fundamentals and it 
is expected to rebound markedly in 2023 and remain almost unchanged in 2024,  it is 
projected  to  stay  below  the  MIP  threshold.  Wages  are  forecast  to  grow  strongly, 
supporting domestic demand, while unit labour costs may grow faster than in the rest 
of the euro area. Nonetheless, consumption and investment are temporarily dampened 
by  high  inflation.  In  recent  years,  house  prices  have  shown  sharp  increases,  even  if 
easing somewhat since mid-2022. Housing supply cannot catch up with demand amid 
weak  residential  investment,  which  may  add  to  continuing  risks  of  overvaluation.  A 
further  reduction  of  vulnerabilities  would  benefit  from  the  timely  and  effective 
implementation  of  the  public  investment  initiatives  and  removing  of  obstacles  to 
investment.  

(13)  Based  on  data  validated  by  Eurostat,13  Germany’s  general  government  deficit 
decreased from 3.7% of GDP in 2021 to 2.6% in 2022, while general government debt 
fell from 69.3% of GDP at the end of 2021 to 66.3% 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 Germany, as its deficit is planned to exceed 3% of 
GDP in 2023. 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. Germany should take account of 
this in the execution of its 2023 budget and in preparing the Draft Budgetary Plan 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  reduction  of  the  energy  tax  on 
fuels  and  a  reduction  of  the  value  added  tax  on  gas  and  district  heating;  while  such 
expenditure-increasing  measures  included  an  energy  lump-sum  bonus  and  the  take-
over of the December bill for private  gas consumers. The Commission  estimates  the 
net  budgetary  cost  of  these  measures  at  1.2%  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 0.8% of GDP in 2022, from 4.2% in 2021. 

(15)  On  18  June  2021,  the  Council  recommended  that  in  2022  Germany16  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 -2.7% of GDP, as recommended by the Council. As recommended by the Council, 

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15 

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Eurostat-Euro Indicators, 47/2023, 21.4.2023 

COM(2023) 631 final, 24.5.2023. 

COM(2023) 141 final, 8.3.2023. 

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. 
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 

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financed 

therefore  preserved  nationally 

Germany  continued  to  support  the  recovery  with  investments  financed  by  the 
Recovery  and  Resilience  Facility.  Expenditure  financed  by  Recovery  and  Resilience 
Facility grants and other EU funds amounted to 0.2% of GDP in 2022 (0.3% of GDP 
in 2021). Nationally financed investment provided a neutral contribution to the fiscal 
stance.18  Germany 
investment,  as 
recommended  by  the  Council.  At  the  same  time,  the  growth  in  nationally  financed 
primary current expenditure (net of new revenue measures) provided an expansionary 
contribution of 2.4 percentage points to the fiscal stance. This significant expansionary 
contribution  included  the  additional  impact  of  fiscal  policy  measures  to  mitigate  the 
economic and social impact of the increase in energy prices (additional net budgetary 
cost of 1.2% of GDP), as well as the costs to offer temporary protection to displaced 
persons  from  Ukraine  (0.1%  of  GDP).  At  the  same  time,  tax  reductions  in  income 
taxation  lowered  government  revenues  and  also  contributed  (0.1%  of  GDP)  to  the 
growth in net primary current expenditure. The significant expansionary contribution 
of  nationally  financed  current  expenditure  was  only  partially  due  to  the  measures  to 
address the economic and social impact of the increase in energy prices, as well as the 
costs  to  offer  temporary  protection  to  displaced  persons  from  Ukraine.  Germany 
therefore  did  not  sufficiently  keep  under  control  the  growth  in  nationally  financed 
current expenditure. 

(17)  The macroeconomic scenario underpinning the budgetary projections in  the Stability 
Programme is realistic. The government projects real GDP to  grow by 0.2% in 2023 
and  1.8%  in  2024.  By  comparison,  the  Commission  2023  spring  forecast  projects  a 
similar real GDP growth of 0.2% in 2023 and 1.4% in 2024. 

(18) 

In its 2023 Stability Programme, the government expects that the general government 
deficit  ratio  will  increase  to  4¼%  of  GDP  in  2023.  The  increase  in  2023  mainly 
reflects  the  additional  expenditure  for  the  energy  price  brakes  regarding  gas  and 
electricity. According to the Programme, the general government debt-to-GDP ratio is 
expected to increase from 66.3% at the end of 2022 to 67¾% at the end of 2023. The 
Commission  2023  spring  forecast  projects  a  government  deficit  of  2.3%  of  GDP  for 
2023. This is lower than the deficit projected in the Stability Programme, mainly due 
to  assumed  lower  expenditure  for  the  energy  price  brakes.  The  Commission  2023 
spring  forecast  projects  a  lower  general  government  debt-to-GDP  ratio,  of  65.2%  at 
the end of 2023. The difference is due to the lower deficit. 

(19)  The government balance in 2023 is expected to continue to be impacted by the fiscal 
measures adopted to mitigate the economic and social impact of the increase in energy 
prices. They consist of new measures compared to 2022, in particular the energy price 
brakes for gas and electricity. The cost of these measures is partly offset by taxes on 
windfall  profits  of  energy  suppliers,  namely  a  levy  on  extraordinary  profits.  Taking 
these  revenues  into  account,  the  net  budgetary  cost  of  the  support  measures  is 
projected  in  the  Commission  2023  spring  forecast  at  2.0%  of  GDP  in  202319.  Most 

funds, 
the Fiscal Statistical Tables.   

relative 

to  medium-term 

potential 

growth. For  more 

details 

see  Box 1 

in 

18 

19 

Other nationally financed capital expenditure provided an expansionary contribution of 0.4 percentage 
points  of  GDP.  This  contribution  is  mainly  related  to  the  nationalisation  and  recapitalisation  of 
wholesale gas suppliers in Germany for guaranteeing energy security. 

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. 

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measures in 2023 do not appear targeted to the most vulnerable households or firms, 
although many of them preserve the price signal to reduce energy demand and increase 
energy  efficiency.  As  a  result,  the  amount  of  targeted  support  measures,  to  be  taken 
into  account  in  the  assessment  of  compliance  with  the  recommendation  for  2023,  is 
estimated in the Commission 2023 spring forecast at 0.5% of GDP in 2023 (compared 
to  0.3%  of  GDP  in  2022).  The  budgetary  cost  of  temporary  protection  to  displaced 
persons  from  Ukraine  is  projected  to  remain  stable  compared  to  2022.  Finally,  the 
2023  government  balance  is  expected  to  benefit  from  the  phasing  out  of  COVID-19 
temporary emergency measures of 0.8% of GDP. 

(20)  On 12 July 2022, the Council recommended20 that Germany 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. Germany should stand ready to adjust current spending to the 
evolving situation. Germany 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  (+0.5%  of  GDP),  in  a  context  of  high  inflation.  This  follows  an 
expansionary fiscal stance in 2022 (-2.7% 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 0.3% of GDP to the fiscal stance. 
This  includes  the  increased  cost  of  the  targeted  support  measures  to  households  and 
firms  most  vulnerable  to  energy  price  hikes  by  0.2%  of  GDP.  In  sum,  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 0.2% of GDP in 2023, while nationally 
financed investment is projected to provide a neutral contribution to the fiscal stance22. 
Therefore, Germany plans to finance additional investment through the Recovery and 
Resilience  Facility  and  other  EU  funds,  and  it  is  projected  to  preserve  nationally-
financed  investment.  It  plans  to  finance  public  investment  for  the  green  and  digital 
transitions,  and  for  energy  security,  such  as  energetic  renovation  of  buildings, 
improvement  of  a  charging  infrastructure  for  electric  cars  and  equipping  schools  for 
the digital  age, which are partly funded by the Recovery and Resilience Facility  and 
other EU funds. 

(22)  According  to  the  Stability  Programme  the  general  government  deficit  is  expected  to 
decline to 1¾% of GDP in 2024. The decrease in 2024 mainly reflects the phasing out 
of  the  energy  price  brakes.  The  programme  expects  the  general  government  debt-to-
GDP ratio to decrease to 66½% at the end of 2024. Based on policy measures known 

20 

21 

22 

Council Recommendation of 12 July 2022 on the 2022 National Reform Programme of Germany and 
delivering a Council opinion on the 2022 Stability Programme of Germany, OJ C 334, 1.9.2022, p. 35.  
Based  on  the  Commission  spring  2023  forecast,  the  medium-term  (10-year  average)  potential  output 
growth of Germany, which is used to measure the fiscal stance, is estimated at 7.1% in nominal terms. 
Other nationally financed capital expenditure is projected to provide a contractionary contribution of 0.3 
percentage points of GDP. This contribution is mainly related to the discontinuation of the measure to 
nationalise and recapitalise wholesale gas suppliers in Germany for guaranteeing energy security of the 
year before. 

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at  the  cut-off  date  of  the  forecast,  the  Commission  2023  spring  forecast  projects  a 
government deficit of 1.2% of GDP in 2024. This is lower than the deficit projected in 
the programme, mainly due to lower estimations for the energy support measures. The 
Commission  2023  spring  forecast  projects  a  lower  general  government  debt-to-GDP 
ratio, of 64.1% at the end of 2024, mainly due to the lower deficit.  

(23)  The  Stability  Programme  envisages  the  phasing  out  of  most  of  the  energy  support 
measures in 2024. The Commission currently assumes the net cost of energy support 
measures at 0.3% of GDP in 2024. These estimates hinge upon the assumption of no 
renewed  energy  price  increases.  Most  of  the  energy  support  measures  that  are 
currently  planned  to  remain  in  place  in  2024  do  not  appear  targeted  to  vulnerable 
households or firms. Most of them 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  considerations,24  an  improvement  in  the 
structural balance of at least 0.3% 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 2.5%, as reflected in this recommendation.  

At the same time, the remaining energy support measures (currently estimated by the 
Commission  at  2.0%  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 below the recommended maximum 
growth rate for 2024. 

(25)  Assuming  unchanged  policies,  the  Commission  2023  spring  forecast  projects  net 
nationally financed primary expenditure to grow at 2.4% in 2024, which is below 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 
due to some of such measures remaining in force in 2024 and to revenue decreasing 
discretionary measures such as various reductions in income tax.  

(26)  According to the programme, government investment is expected to remain stable at 
2½% of GDP in 2023 and in 2024. The programme refers to reforms and investments, 
that  are  expected  to  contribute  to  fiscal  sustainability  and  sustainable  and  inclusive 
growth.  These  include  various  reforms  of  the  income  tax  system  as  well  as  of  the 
pension system. 

(27)  The Stability Programme outlines a medium-term fiscal path until 2026. According to 
the programme, the general government deficit is expected to gradually decline to ¾% 

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  Germany  would  need  an  average  annual  increase  in  the  structural 
primary balance as a share of GDP of 0.25 percentage points to achieve a plausible debt reduction 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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of  GDP  in  2025  and  2026.  The  general  government  deficit  is  therefore  planned  to 
decrease  below  3%  of  GDP  in  2024.  According  to  the  programme,  the  general 
government debt-to-GDP ratio is expected to decrease from 66½% at the end of 2024 
to 65½% by the end of 2026. 

(28)  While  employment  performance  remains  robust,  in  a  context  of  rapid  population 
ageing, labour and skills shortages are expected to increase further. The working age 
population is expected to shrink by 3.7 million in the 2020s due to the baby boomer 
generation  retiring.  This  will  significantly  increase  the  financing  needs  of  the 
mandatory  pay-as-you-go  system  (first  pension  pillar),  and  possibly  challenge  the 
adequacy of pensions. A net migration balance of around 400 000 people a year would 
be  needed  to  offset  a  decreasing  level  of  potential  labour  force.  The  statutory 
retirement age will gradually rise to 67 years in 2031. Although the employment rate 
of  workers  aged  55-64  is  among  the  highest  in  the  EU,  the  increase  in  the  effective 
retirement age has slowed in recent years, and employment in the age group above 65 
years lags behind the EU’s top performers. This is also due to early retirement options, 
adding further pressure on the sustainability of the pension system.  People who have 
worked at least 35 years can retire early, with  a relatively small reduction in pension 
benefits. Those who have worked at least 45 working  years can retire without  losing 
pension  entitlements  (Rente  nach  45  Beitragsjahren).  The  state-subsidised  private 
pension  schemes  (third  pillar  personal  pension  schemes  Riester  Rente)  have  been 
underused so far. Despite efforts to increase the use of occupational pensions (second 
pillar), coverage remains at about 56%. 

(29)  The tax mix in  Germany continues  to  rely heavily  on labour tax revenues, while tax 
bases that can support inclusive and sustainable growth remain underused. The labour 
tax  wedge  is  one  of  the  highest  in  the  EU,  and  the  interplay  of  the  tax  and  transfer 
system results in weak incentives to increase hours worked for low-wage and second 
earners,  often  women.  This  weighs  on  the  labour  supply  and  aggravates  labour 
shortages. Germany’s share of environmental taxes is below the EU average for both 
energy  and 
taxation  does  not  encourage  more 
environmentally  friendly  transport.  Environmentally  harmful  subsidies  such  as  fossil 
fuel  subsidies  (including  tax  exemptions  and  tax  reductions)  remain  substantial, 
hampering the green transition.  

taxation.  Vehicle 

transport 

(30) 

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.  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. Still, while the implementation 
of  Germany’s  recovery  and  resilience  plan  is  underway,  there  are  significant  delays. 
Limited  resources  attached  to  the  plan  implementation  and  insufficient  prioritisation 
have led Germany to fall behind on the implementation process. Germany still needs 
to  sign its operational  arrangements and submit its first  payment request.  Germany’s 
recovery and resilience plan was already revised once on 14 February 2023, adjusting 
two  investment  measures  that  could  not  be  fully  completed  because  of  objective 
circumstances26.  The  plan  is  expected  to  be  revised  again  in  2023  with  another 
addendum, to cover the REPowerEU chapter and to accommodate the increase of non-

26 

Council Implementing Decision of 14 February 2023 amending the Council Implementing Decision of 
13 July 2021 on the approval of the assessment of the  recovery and resilience plan  for  Germany (ST 
5536/23). 

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repayable  support.  However,  negotiations  on  the  REPowerEU  chapter  and  to 
accommodate the increase of non-repayable support are ongoing. 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  Germany’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.  

(31)  The Commission approved all of Germany’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 Germany 

(32)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan, Germany faces a number of additional challenges related to digitalisation, energy 
policy and the green transition.  

that 

shows 

the  country 

(33)  While  Germany  has  made  efforts  to  improve  the  digitalisation  of  public  services, 
implementation remains slow. Only a few of the objectives in the Online Access Act, 
which  makes  the  continuous  digitalisation  of  the  front  end  of  all  administrative 
services  mandatory,  were  achieved  by  the  target  date  (end  of  2022).  The 
is  also 
Commission’s  eGovernment  Benchmark 
underperforming on digitalising the back office, which is crucial for effective service 
delivery  beyond  the  scope  of  the  Online  Access  Act.  In  connection  to  this, 
modernising registers as part of the Register Modernisation Act to implement the EU’s 
‘once-only’  principle  –  where  individuals  and  businesses  only  have  to  provide 
standard information once to authorities – has been declared a priority. However, there 
has been little progress since the law entered into force in 2021. Moreover, there is a 
low  take-up  of  services  that  have  been  digitalised:  Germany  scores  below  the  EU 
average  in  terms  of  the  proportion  of  people  using  e-government  services.  Germany 
also  performs  below  the  EU  average  in  various  aspects  of  the  eGovernment 
Benchmark  indicators  such  as  transparency,  the  existence  of  key  enablers  and  the 
accessibility  of  digital  public  services  to  individuals  from  abroad.  The  National 
Regulatory  Control  Council  considers  the  implementation  of  the  Online  Access  Act 
inadequate and has identified projected labour shortages as a key risk in the absence of 
efficiency gains through digitalisation. The bottlenecks identified in the digitalisation 
of  public  services  equally  apply  to  corresponding  measures  in  the  German  recovery 
and resilience plan. 

(34) 

Improving  digital  skills  is  crucial  for  the  digital  transition  to  address  skilled  worker 
shortages and raise productivity. At 49% in 2021, Germany is below the EU average 
of  54%  of  those  aged  16-74  with  at  least  basic  digital  skills,  hampering  the  digital 
transition. Of all 16-19-year-olds, only 50% had at least basic digital skills in 2021, 19 
percentage  points  below  the  EU  average.  Although  Germany  scores  above  the  EU 
average  on  the  percentage  of  ICT  specialists  in  employment  and  matches  the  EU 
average  for  female  ICT  specialists,  there  is  a  high  number  of  unfilled  vacancies, 
reflecting  further  needs.  Further  efforts  at  tackling  teacher  shortages  and  training 
teachers  better  in  digitalisation  at  all  educational  levels  would  be  key  to  improving 
digital skills. The integration of digital technology in business activities is only around 

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the  EU  average,  including  the  share  of  small  and  medium-sized  businesses  with  at 
least  a  basic  level  of  digital  intensity  and  the  uptake  by  businesses  of  advanced 
technologies such as cloud, big data and artificial intelligence.  The German recovery 
and  resilience  plan  includes  several  measures  that  support  digital  skills,  and  in 
particular  digital  education,  such  as  investment  in  digital  devices  for  teachers,  an 
education  platform  and  educational  centres  of  excellence.  Moreover,  Germany  is 
implementing  measures  to  help  up-  and  reskill  its  workforce.  This  includes  focusing 
on  the  digitalisation  of  businesses  (e.g.  European  Digital  Innovation  Hubs  or  the 
Digital Now (Digital Jetzt) investment support scheme). 

(35)  Overall,  only  19.3%  of  households  have  access  to  a  fibre  broadband  connection, 
placing  Germany  among  the  Member  States  with  the  lowest  fibre  coverage  (second 
lowest  in  the  EU,  with  the  top  five  EU  performers  having  fibre  coverage  of  at  least 
85%).  The  lack  of  fibre  connections  and  very  high  capacity  networks  in  general  is 
particularly pronounced in rural areas. This holds back productivity growth, especially 
by small  and medium-sized businesses. The target  of  connecting 50% of households 
and businesses to the network via fibre optics by 2025 (and 100% by 2030) risks being 
delayed.  Improving  framework  conditions,  for  example  by  increasing  planning  and 
implementation  capacity  in  the  public  sector,  is  crucial  to  accelerate  fibre  coverage. 
Meeting  the  network  targets  will  also  require  improvements  to  the  administrative 
procedures  involved  in  applying  for  and  granting  permits  and  the  standardisation  of 
alternative, less time-consuming installation methods. 

(36)  Germany  managed  to  reduce  its  high  dependence  on  Russian  gas  and  oil  effectively 
compared to 2021 (from 65% to nearly zero for gas, and from 34% to below 25% for 
oil).  It  has  planned  and  started  implementing  natural  gas  infrastructure  that  would 
replace Russian gas imports completely in the medium term. Germany fulfilled its gas 
storage  obligations  last  winter,  reaching  90.1%  by  31  December  2022.  Thanks  to 
interconnected gas markets, liquefied natural gas (LNG) imported by Germany would 
also  be  able  to  find  its  way  to  other  European  countries  and  contribute  to  Europe’s 
security of supply, provided the relevant infrastructure is implemented without further 
delays.  At  the  same  time,  the  country  is  still  dependent  on  imported  fossil  fuels. 
Germany’s  consumption  of  natural  gas  has  dropped  by  16%  in  the  period  August 
2022-March 2023, compared with the average gas consumption over the same period 
in the preceding 5 years, beyond the 15% reduction target. Germany is encouraged to 
keep pursuing efforts to temporarily reduce gas demand until 31 March 202427. 

(37)  Renewable electricity is vital for the successful roll-out of Germany’s green transition 
plans, including for renewable hydrogen production, electric vehicles and heat pumps 
as  well  as  for  achieving  energy  security  in  the  medium  term.  However,  a  three-fold 
acceleration in the deployment of renewable energy (from +67% over the past 8 years 
to  +196%  in  the  coming  8  years)  would  be  necessary  to  meet  national  deployment 
targets. Complex and lengthy permitting procedures have been holding back the roll-
out of renewable energy sources and additional net-zero technologies, while recently 
adopted  legislation  to  improve  the  processes  has  yet  to  be  implemented.  Beyond  the 
challenges addressed, permitting is hampered by the lack of digitalisation and related 
skills  as  well  as  understaffed  authorities,  including  courts.  Bottlenecks  remain  with 
regard  to  grid  flexibility,  including  storage,  and  the  expansion  of  high  voltage 
transmission  grids,  including  the  implementation  of  Projects  of  Common  Interest. 

27 

Council Regulation (EU) 2022/1369 and Council Regulation (EU) 2023/706. 

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Moreover,  Germany’s  distribution  grids  have  not  been  sufficiently  digitalised  and 
upgraded  to  accommodate  the  many  new  manufacturers  and  consumers  of  electric 
vehicles, solar photovoltaic systems and heat pumps, while electricity storage could be 
expanded.  Efforts  on  energy  efficiency,  including  in  transport,  domestic  heating  and 
industry, and the roll-out of heat pumps in an affordable way face challenges in terms 
of  scale-up  and  timely  implementation  to  allow  Germany  to  meet  its  climate  and 
energy  targets,  reduce  its  reliance  on  fossil  fuels  and  boost  competitiveness  and  job 
creation,  including  in  the  clean  tech  manufacturing  sector.  Reaching  climate  targets 
requires  further  action  to  decarbonise  the  transport  and  building  sectors.  These  have 
failed  to  meet  national  sector-specific  emission  targets  for  2022,  despite  the 
introduction  of measures such as a national  carbon price to  bring down  emissions in 
these two sectors. The natural carbon sink in Germany has declined since 2016, which 
calls  for  action  on  forest  and  peatland  restoration.  Stronger  efforts  on  climate 
adaptation,  the  circular economy  and environmental protection  reduce  the  risks from 
global challenges and contribute to climate resilience, securing natural resources and 
reducing the industry’s dependence on critical raw materials. 

(38)  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.  Improving the education outcomes of disadvantaged 
groups  provides  a  better  basis  for  continued  education.  Adult  learning  is  essential  to 
tackle persistent skills shortages. However, in the last 10 years the participation rate of 
adults  in  learning  over  the  past  4  weeks  has  been  roughly  stable  and  below  the  EU 
average  (8.1%  in  2022;  EU  average  11.9%),  and  was  only  4%  for  low-qualified 
workers.  In  addition,  in  energy-intensive  industries,  workers’  participation  in 
education and training declined from 9.8% in 2015 to 7.6% in 2021 and is below the 
EU  average  (8.9%).  Promoting  participation  in  initial  and  continuous  vocational 
education  and  learning  programmes  to  support  the  green  transition  would  be  in  line 
with Germany’s target of having 65% of adults in learning every year by 2030. 

(39) 

(40) 

In light of the Commission’s assessment, the Council has examined the 2023 Stability 
Programme and its opinion28 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, 
including through their recovery and resilience plans, to (i) preserve debt sustainability 
and refrain from broad-based support to aggregate demand in 2023, better target fiscal 
measures taken to mitigate the impact of high energy prices and reflect on appropriate 
ways to wind down support as energy price pressures diminish; (ii) sustain high public 
investment and promote private investment to support the green and digital transition; 
(iii)  support  wage  developments  that  mitigate  the  loss  in  purchasing  power  while 
limiting  second-round  effects  on  inflation,  further  improve  active  labour  market 
policies  and  address  skills  shortages;  (iv)  improve  the  business  environment  and 

28 

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

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(41) 

ensure that energy support to companies is cost-effective, temporary, targeted to viable 
firms  and  that  it  maintains  incentives  for  the  green  transition;  and  (v)  preserve 
macrofinancial-  stability  and  monitor  risks  while  continuing  to  work  on  completing 
the Banking Union. For Germany, recommendations (1), (2), (3) and (4) contribute to 
the implementation of the first, second and third euro area recommendations. 

In  light  of  the  Commission’s  in-depth  review  and  this  assessment,  the  Council  has 
examined  the  2023  National  Reform  Programme  and  the  2023  Stability  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 the persistent large current account surplus. Recommendations 
(2),  (3)  and  (4)  contribute  to  addressing  recommendation  (1)  in  as  much  as  higher 
investment is concerned. Policies referred to in recommendation (1) contribute to both 
addressing  imbalances  and  implementing  the  recommendations  for  the  euro  area,  in 
line with recital 40. 

HEREBY RECOMMENDS that Germany 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 2.5%. 

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.  Implement  public  investment  initiatives  as  planned.  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.  

Improve  the  tax  mix  for  more  inclusive  and  sustainable  growth,  in  particular  by 
improving tax incentives in order to increase hours worked. Safeguard the long-term 
sustainability of the pension system. 

2. 

3. 

Significantly  accelerate  the  implementation  of  its  revised  recovery  and  resilience 
plan, also by ensuring sufficient resources, and swiftly finalise the addendum and the 
REPowerEU chapter with a view to rapidly starting its implementation. Proceed with 
in  close 
the 
complementarity and synergy with the recovery and resilience plan.  

implementation  of  cohesion  policy  programmes, 

speedy 

Speed up the digitalisation of the entire service chain for public services and improve 
people’s  digital  skills.  Remove  investment  obstacles  and  boost  investment  in  very 
high capacity digital communication networks.  

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4. 

Increase  efforts  to  further  reduce  the  overall  reliance  on  fossil  fuels  by  boosting 
investment  in  and  accelerating  the  deployment  of  renewable  energy  and  electricity 
networks  through  improved  administrative  capacity  and  streamlined  processes, 
including  permitting  procedures.  Step  up  energy  efficiency  efforts  in  transport, 
building and industry, including through investments in heating systems and further 
policy  measures  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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