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

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 619 final  Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of the Netherlands and delivering a Council opinion on the 2023 Stability Programme of the Netherlands {SWD(2023) 619 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2023 National Reform Programme of the Netherlands and delivering a Council 
opinion on the 2023 Stability Programme of the Netherlands 

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 the Netherlands 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  the  Netherlands’  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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(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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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 8 July 2022, the Netherlands 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  4 
October 2022, the Council adopted its Decision on the approval of the assessment of 
the  recovery  and  resilience  plan  for  the  Netherlands10.  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  the  Netherlands  has  satisfactorily  fulfilled  the 
relevant  milestones  and  targets  set  out  in  the  Council  Implementing  Decision. 
Satisfactory fulfilment presupposes that the achievement of preceding milestones and 
targets has not been reversed. 

(10)  On  28  April  2023,  the  Netherlands  submitted  its  2023  National  Reform  Programme 
and,  on  28  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 the  Netherlands’ 
biannual reporting on the progress made in achieving its recovery and resilience plan.  
(11)  The Commission published the 2023 country report for the Netherlands11 on 24 May 
2023. It assessed the Netherlands’ progress in addressing the relevant country-specific 
recommendations adopted by the Council between 2019 and 2022, and took stock of 
the  Netherlands’  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  the  Netherlands’  progress  on 
implementing the European Pillar of Social Rights and on achieving the EU headline 
targets on employment, skills and poverty reduction, as well as progress in achieving 
the UN’s Sustainable Development Goals.  

(12)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No  1176/2011  for  the  Netherlands  and  published  its  results  on  24  May  202312.  It 
concluded  that  the  Netherlands  is  experiencing  macroeconomic  imbalances.  In 
particular,  vulnerabilities  relating  to  high  private  debt  levels  and  a  large  current 
account  surplus,  which  have  cross-border  relevance,  persist  despite  some  signs  of 
reduction. The current account surplus, despite recent data revisions, and private debt 
are large by international standards as well as above the fundamentals of the economy. 
The  large  current  account  surplus  dropped  in  2022,  driven  by  worsening  terms  of 
trade, with the current account in constant prices increasing, and by a widening of the 
deficit in primary incomes. With improving terms of trade, the surplus is expected to 

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Council Implementing Decision of  4 October 2022  on the approval of the assessment of the recovery 
and resilience plan for the Netherlands (ST 12275//22; ST 12275//22 ADD 1). 
SWD(2023) 619 final. 
SWD(2023) 640 final. 

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rebound  markedly  in  2023  and  stabilise  in  2024.  Limited  policy  progress  has  been 
made  but  more  needs  to  be  done  to  reduce  obstacles  to  investment.  Non-financial 
corporation  and  household  debt  remains  high:  the  latter  is  more  of  a  concern  as  it 
makes households vulnerable to shocks, with those risks exacerbated by the high and 
rising overvaluation  of house prices. Going forward, debt  is  expected to  continue on 
its  moderately  decreasing  path.  Despite  moderately  falling  house  prices,  pressure  on 
the  housing  market  remains,  notably  as  new  housing  construction  remains 
significantly  below  government 
time,  debt-financed 
targets.  At 
homeownership  continues  to  be  subsidised  by  favourable  taxation,  while  policies 
regarding the private rental market risk undermining its development.  

the  same 

(13)  Based  on  data  validated  by  Eurostat,13  The  Netherlands’  general  government  budget 
balance  decreased  from  a  deficit  of  2.4%  of  GDP  in  2021  to  a  balanced  budget  in 
2022, while general  government  debt  fell from  52.5% of GDP at  the end of 2021 to 
51.0% at the end of 2022. 

(14)  The  general  government  balance  has  been  impacted  by  the  measures  adopted  to 
mitigate the economic and social impact of the increase in energy prices. In 2022, such 
revenue-decreasing  measures  included  the  reduction  of  VAT  on  energy  and  of  the 
excise duty on petrol and diesel; while such expenditure-increasing measures included 
a  discount  on  the  energy  bill  in  November  and  December  and  the  support  to  low-
income  households  with  high  energy  bills.  The  cost  of  these  measures  was  partly 
offset  by  new  taxes  on  windfall  profits  of  energy  producers  and  suppliers,  namely  a 
solidarity contribution in application of Council Regulation (EU) 2022/1854 at a rate 
of 33%. The Commission estimates the net budgetary cost of these measures at 0.6% 
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 0.3% of GDP in 2022, from 1.8% in 2021. 
(15)  On 18 June 2021, the Council recommended that in 2022 The Netherlands14 pursue 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 stance15 in 2022 was supportive, at  
-0.5%  of  GDP,  as  recommended  by  the  Council.  As  recommended  by  the  Council, 
The Netherlands 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 (0.2% of GDP 
in 2021). Nationally financed investment provided a contractionary contribution of 0.1 
percentage  points  to  the  fiscal  stance.16  The  Netherlands  therefore  did  not  preserve 
nationally financed investment, which is not in line with the Council recommendation. 

13 

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Eurostat-Euro Indicators, 47/2023, 21.4.2023 

Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Stability 
Programme of The Netherlands, OJ C 304, 29.07.2021, p. 88. 
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 
the Fiscal Statistical Tables.  
Other nationally financed capital expenditure provided an expansionary contribution of 0.2 percentage 
points of GDP. 

growth. For  more 

to  medium-term 

see  Box 1 

potential 

relative 

details 

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At the same time, the growth in nationally financed primary current expenditure (net 
of  new  revenue  measures)  provided  an  expansionary  contribution  of  0.4  percentage 
points  to  the  fiscal  stance.  The  Netherlands  therefore  sufficiently  kept  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 1.6% in 2023 
and  1.4%  in  2024.  By  comparison,  the  Commission  2023  spring  forecast  projects  a 
slightly higher real GDP growth of 1.8% in 2023 and slightly lower growth of 1.2% in 
2024. This is mainly due to small differences in the domestic demand outlook in both 
years. 

(18) 

In its 2023 Stability Programme, the government expects that the general government 
deficit will increase to 3.0% of GDP in 2023. The increase in 2023 mainly reflects the 
cost  of the energy package,  rising interest  expenditure and additional spending plans 
related to societal challenges, such as the green transition, limiting excessive nitrogen 
depositions, education and housing supply. According to the Programme, the general 
government debt-to-GDP ratio is expected to decrease from 49.3% at the end of 2022 
to  48.4%  at  the  end  of  2023.  The  Commission  2023  spring  forecast  projects  a 
government deficit of 2.1% of GDP for 2023. This is lower than the deficit projected 
in  the  Stability  Programme,  mainly  due  to  the  fact  that  the  government  balance 
outcome data for 2022 turned out better than assumed in the Stability Programme. The 
Commission 2023 spring forecast projects a higher general  government debt-to-GDP 
ratio, of 49.3% at the end of 2023. The difference is due to the fact that the outcome 
data for 2022 turned out higher than assumed in the Stability Programme, as a result of 
a high stock-flow adjustment in 2022. 

(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  measures extended from 2022 (in particular, the  reduction of 
the  excise  duty  on  petrol  and  diesel  and  the  support  of  low-income  households)  and 
new  measures  such  as  a  price  cap  on  electricity  and  gas  and  the  support  scheme  to 
energy-intensive SMEs. The net budgetary cost of the support measures is projected in 
the  Commission  2023  spring  forecast  at  1.1%  of  GDP  in  202317.  Most  measures  in 
2023  do  not  appear  targeted  to  the  most  vulnerable  households  or  firms,  and  do  not 
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 0.1% of GDP 
in  2022).  The  budgetary  cost  of  temporary  protection  to  displaced  persons  from 
Ukraine is projected to remain stable compared to 2022. 

(20)  On  12  July  2022,  the  Council  recommended18  that  the  Netherlands  take  action  to 
ensure in 2023 that the growth of nationally financed primary current expenditure is in 

17 

18 

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  the Netherlands and 
delivering a Council opinion on the 2022 Stability Programme of the Netherlands, OJ C 334, 1.9.2022, 
p. 154.  

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line  with  an  overall  neutral  policy  stance19,  taking  into  account  continued  temporary 
and  targeted  support  to  households  and  firms  most  vulnerable  to  energy  price  hikes 
and  to  people  fleeing  Ukraine.  The  Netherlands  should  stand  ready  to  adjust  current 
spending to the evolving situation. The Netherlands 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. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary  (- 1.1%  of  GDP),  in  a  context  of  high  inflation.  This  follows  an 
expansionary fiscal stance in 2022 (- 0.5% of GDP). The growth in nationally financed 
primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected to provide an expansionary contribution of 0.9% 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  0.4%  of  GDP.  The  expansionary 
contribution  of  nationally  financed  net  primary  current  expenditure  is  therefore  only 
partly due to the targeted support to households and firms most  vulnerable to energy 
price  hikes  and  to  people  fleeing  Ukraine.  The  expansionary  growth  in  nationally 
financed  primary  current  expenditure  (net  of  discretionary  revenue  measures)  is  also 
driven by untargeted energy measures, permanent increases in public sector wages and 
social  benefits  and  higher  spending  on  healthcare.  In  sum,  the  projected  growth  of 
nationally  financed  primary  current  expenditure  is  not  in  line  with  the  Council 
recommendation.  Expenditure  financed  by  Recovery  and  Resilience  Facility  grants 
and  other  EU  funds  amounted  to  0.2%  of  GDP  in  2023,  while  nationally  financed 
investment provided a neutral contribution to the fiscal stance of 0.0 percentage points. 
Therefore,  The  Netherlands  plans  to  finance  additional  investment  through  the 
Recovery and Resilience Facility and other EU funds, and it is projected to  preserve 
nationally  financed  investment.20  It  plans  to  finance  public  investment  for  the  green 
and  digital  transitions,  and  for  energy  security,  such  as  investing  and  facilitating  the 
development of offshore wind parks, incentivising the use of hydrogen and improving 
the digital literacy of students, 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 2.6% of GDP in 2024. The decrease in 2024 mainly reflects the phasing out 
of  energy  measures.  The  programme  expects  the  general  government  debt-to-GDP 
ratio to increase to 48.7% 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 1.7% of GDP in 2024. This is lower than the deficit projected in 
the programme, mainly thanks to  the base effect  from  the lower projected deficit-to-
GDP  ratio  in  2023.  The  Commission  2023  spring  forecast  projects  a  similar  general 
government debt-to-GDP ratio, of 48.8% at the end of 2024. 

(23)  The  Stability  Programme  envisages  the  phasing  out  of  all  of  the  energy  support 
measures  in  2024.  The  Commission  also  assumes  the  full  phasing  out  of  energy 

19 

20 

Based  on  the  Commission  spring  2023  forecast,  the  medium-term  (10-year  average)  potential  output 
growth of the Netherlands, which is used to measure the fiscal stance, is estimated at 7.9% in nominal 
terms. 
Other nationally financed capital expenditure is projected to provide a expansionary contribution of -0.2 
percentage points of GDP. 

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support  measures  in  2024.  This  hinges  upon  the  assumption  of  no  renewed  energy 
price increases. 

(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.21 
Taking  into  account  fiscal  sustainability  considerations,22  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 expenditure23 in 
2024 should not exceed 3.5%, as reflected in this recommendation. At the same time, 
the  remaining  energy  support  measures  (currently  estimated  by  the  Commission  at 
1.1%  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. However, according to the Commission 2023 spring forecast, the growth 
in net nationally financed primary current expenditure in 2023 is not in line with the 
recommendation  of  the  Council.  If  this  is  confirmed,  lower  growth  in  net  primary 
expenditure in 2024 would be appropriate. 

(25)  Assuming  unchanged  policies,  the  Commission  2023  spring  forecast  projects  net 
nationally financed primary expenditure to grow at 1.7% in 2024 which is below the 
recommended growth rate. The adjustment projected in the Commission forecast is in 
line with the savings from the full phasing out of energy support measures. 

(26)  According  to  the  programme,  government  investment  is  expected  to  increase  from 
3.4% of GDP in 2023 to 3.5% of GDP in 2024. The higher investment reflects higher 
nationally  financed  investment  and  investment  financed  by  the  EU,  namely  through 
the  Recovery  and  Resilience  Facility.  The  programme  refers  to  reforms  and 
investments, that are expected to contribute to fiscal sustainability and sustainable and 
inclusive  growth.  These  include  reforms  and  investments  in  the  field  of  education, 
research  and  development,  labour  market  and  the  green  and  digital  transition,  which 
are also part of the Recovery and Resilience Plan. 

(27)  The Stability Programme outlines a medium-term fiscal path until 2027. According to 
the  programme,  the  general  government  deficit  is  expected  to  increase  to  2.8%  by 
2026 and 3.2% of GDP in 2027. The general government deficit is therefore planned 
to  remain  below  3%  of  GDP  until  2026  and  increase  above  3%  of  GDP  in  2027. 
According to the programme, the general government debt-to-GDP ratio is expected to 
increase from 48.7% at the end of 2024 to 52.7% by the end of 2027. 

(28)  Rapidly  rising  house  prices  in  recent  years  have  resulted  in  an  overvalued  housing 
market. However, with financial conditions tightening, the housing market reached a 

21 

22 

23 

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  The  Netherlands  would  need  an  average  annual  increase  in  the 
structural  primary  balance  as  a  share  of  GDP  of  0.35  percentage  points  to  achieve  a  plausible  debt 
reduction or to 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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(29) 

turning  point  in  mid-2022  as  house  prices  started  to  decrease  in  response  to  rising 
mortgage  interest  rates.  Mortgage  debt  relative  to  GDP  remains  high  in  the 
Netherlands,  by  international  standards.  This  is  driven  by  relatively  high  borrowing 
limits  (loan-to-value)  and  substantial  tax  relief  on  mortgage  payments.  Although  the 
mortgage  interest  tax  deductibility  is  being  reduced  gradually,  it  remains  high.  The 
resulting  high  household  debt  makes  households  vulnerable  to  economic  shocks, 
which is especially relevant now that risks of house price corrections have increased. 
At  the  same  time,  the  private  rental  market  is  relatively  small,  which  results  in  a 
limited supply of affordable and available alternatives to buying a house. The lack of 
affordable  rental  housing  also  undermines  labour  mobility.  Removing  obstacles  that 
are  currently  holding  back  investments,  including  in  residential  construction,  could 
allow  the  government  to  successfully execute  its  plans  for  an  increase  in  housing 
supply  and  could  therefore  contribute  to  external  rebalancing  as  well  as  the  better 
functioning of the housing market. 

in  2022, 

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  investment  to  be  implemented  by  2026.  While  the 
Netherlands’  recovery  and  resilience  plan  was  only  adopted 
its 
implementation  is  now  underway.  Proceeding  swiftly  with  the  negotiation  of  the 
operational agreement will help the implementation of the plan and it is necessary for 
the  submission  of  the  first  payment  request,  which  is  expected  by  the  end  of  2023. 
Implementation is ongoing, at this stage, risks of non-absorption appear limited given 
the  relatively  small  financial  allocation.  Preparations  of  a  REPowerEU  chapter  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 the Netherlands’ 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.  

(30)  The  Commission  approved  all  of  the  Netherlands’  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 the Netherlands.  

(31)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan, the Netherlands faces a number of additional challenges related to labour market 
segmentation,  labour  and  skills  shortages,  reliance  on  fossil  fuels  and  excessive 
nitrogen deposits.  

(32)  The share of flexible employment (both workers on flexible and temporary contracts 
and  the  self-employed  without  employees)  in  the  labour  market  remains  high  in  the 
Netherlands.  This  points  to  an  increasing  risk  of  labour  market  segmentation,  with 
particularly  distortive  effects  at  the  margins  of  the  labour  market.  This  can  amplify 
inequality in opportunities and weigh on productivity. A certain degree of flexibility in 
the  labour  market  can  contribute  to  the  adaptability  of  the  economy  and  may  also 
better  accommodate  individual  preferences.  However,  the  excessive  use  of  flexible 
types  of  employment  can  have  negative  effects  for  workers  and  the  wider  economy. 

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For  example,  participation  in  training  and  lifelong  learning  is  a  challenge  for  those 
with flexible contract employment arrangements, and this in turn reduces investment 
in  skills.  In  cooperation  with  the  social  partners,  the  Dutch  government  intends  to 
address  the  differences  between  permanent  and  flexible  work  arrangements.  Plans 
include  the  abolishment  of  zero-hours  contracts  and  the  replacement  of  ‘on-call’ 
contracts  in  their  present  form  with  a  new  type  of  contract  providing  more  income 
security  for  workers,  and  improvements  to  the  job  security  of  temporary  agency 
workers. Rapid progress in implementing these plans will be important to ensure that 
the choice of a certain type of employment contract is driven by job-specific needs or 
the  preferences  of  job  holders,  while  also  improving  the  employment  and  social 
position of people in flexible employment and reducing labour market segmentation.  

(33)  Labour and skills shortages were already a feature of the Dutch labour market before 
the COVID-19 pandemic, but have become more widespread across sectors since then. 
Sectors such as ICT, healthcare, education and technical jobs face structural shortages, 
which already  existed  before the pandemic  and are expected to  persist,  partly  due to 
demographic developments.  Despite a high overall participation rate, the Netherlands 
still has a pool of untapped and underutilised potential workers, such as people with a 
migrant background and those working in part-time employment. Once in a part-time 
job,  few  employees  choose  to  increase  their  hours  worked.  This  can  be  partially 
explained  by  the  high  marginal  tax  rates,  obligations  (or  the  anticipation  of  future 
obligations)  related  to  informal  care  of  children  or  other  family  members  and/or  the 
quality of work and work-life balance. To tackle labour and skills shortages it will be 
necessary  to  take  a  comprehensive  approach,  while  also  addressing  sector-specific 
needs and barriers and productivity-enhancing investment. A combination of policies 
could be considered to tackle labour and skills shortages. These policies could include: 
(i)  further  reducing  the  marginal  tax  rate  and/or  improving  the  transparency  of  the 
marginal tax rate that individuals face; (ii) increasing wages in sectors with structural 
shortages,  in  particular  those  with  a  concentration  of  public  and  semi-public 
employers;  (iii)  promoting  quality  of  work  and  work-life  balance;  (iv)  improving 
career  guidance;  and  (v)  improving  access  to  high-quality  and  affordable  childcare. 
Furthermore,  strengthening  upskilling  or  reskilling  opportunities  via  targeted  and 
tailored measures, in particular for those at the margins of the labour market and the 
inactive, could help alleviate labour and skills shortages and improve social outcomes.   

(34)  Although  the  Netherlands  has  introduced  measures  to  reduce  its  dependency  on 
Russian fossil fuels, oil and natural gas accounted for 38% and 41% respectively of its 
energy  mix,  making  the  Dutch  economy  vulnerable  to  global  price  developments. 
Additional  effort  is  needed  for  the  Netherlands  to  achieve  the  EU  2030  renewable 
energy targets. Despite increased ambitions for installing additional renewable energy 
capacity, the share of renewables in final energy consumption amounted to only 13.0% 
in  2021,  which  is  below  the  politically  agreed  target  at  the  EU  level  and  the  EU 
average  of  21.8%.  As  a  result,  the  Netherlands  continues  to  be  among  the  worst 
performing  Member  States  in  terms  of  the  renewables  share  in  gross  final  energy 
consumption,  having  one  of  the  largest  gaps  between  the  2021  share  and  the  2030 
targets. The expansion of the electricity grid, for both transmission and distribution, is 
essential to speed up the deployment of both onshore and offshore renewable energy 
infrastructure.  Due  to  the  progressively  increasing  congestion  of  the  electricity  grid, 
network  operators  are  frequently  forced  to  refuse  grid  access  requests  from  new 
electricity  producers  and  consumers.  With  gas  consumption  in  dwellings  accounting 
for around 25% of total natural gas consumption in the Netherlands, energy efficiency 
improvements  in  the  building  stock  (for  instance  through  minimum  energy 

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performance standards to trigger renovations and more rigorous enforcement of energy 
audit requirements for industry) can contribute significantly towards further reducing 
carbon  emissions  and  dependency  on  fossil  fuels.  The  Netherlands’  consumption  of 
natural gas has dropped by 29% 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.  The  Netherlands  is  encouraged  to  keep 
pursuing efforts to temporarily reduce gas demand until 31 March 202424.  

(35)  Due  to  the  negative  effects  of  excessive  nitrogen  deposits  in  natural  areas  resulting 
mainly from the intensive Dutch agricultural sector, the issuing of permits for certain 
nitrogen-emitting  projects,  in  particular  construction  projects,  is  currently  blocked. 
The  Dutch  government  is  taking  action  to  reduce  nitrogen  deposits,  in  particular 
through integrated area  programmes  at  provincial  level. Further support is needed to 
make  agriculture  more  sustainable  while  ensuring  competitiveness  through  for 
instance  support  for  the  reduction  of  livestock,  the  acceleration  of  the  transition  to 
circular and/or organic agriculture and increasing digitalisation and innovation. 

(36)  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  the 
Netherlands  for  108  occupations  that  required  specific  skills  or  knowledge  for  the 
green transition, including environmental-protection professionals, insulation workers, 
and civil-engineering technicians.  

(37) 

(38) 

In light of the Commission’s assessment, the Council has examined the 2023 Stability 
Programme and its opinion25 is reflected in recommendation (1) below.  

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  Economic  and  Monetary 
Union, the Council recommended that 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 
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 
macro-financial  stability  and  monitor  risks  while  continuing  to  work  on  completing 
the  Banking  Union.  For  the  Netherlands,  recommendations  (1),  (2),  (3)  and  (4) 
contribute to the implementation of the first, second, third, fourth and fifth euro area 
recommendations.  

24 
25 

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

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(39) 

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 related to high private debt and vulnerabilities linked to a high current 
to  addressing 
account 
recommendation (1) in as much as higher investment is concerned. Recommendation 
(1) contributes to both addressing imbalances and implementing the recommendation 
for the euro area, in line with recital 38. 

surplus.  Recommendations 

(4)  contribute 

(2)  and 

HEREBY RECOMMENDS that the Netherlands 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 3.5%. 

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.  

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. 

Reduce  the  household  debt  bias  and  distortions  in  the  housing  market.  Support  the 
availability  and  affordability  of  housing  on  the  private  rental  market.  Remove 
obstacles holding back investments, including in residential construction. 

Proceed  with  the  steady  implementation  of  its  recovery  and  resilience  plan  and 
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.   

Reduce incentives to use flexible or temporary contracts. Taking into account sector-
specific  needs,  address  structural  labour  and  skills  shortages,  including  by  tapping 
into underutilised labour potential and strengthening up- and reskilling opportunities, 
in particular for those at the margins of the labour market and the inactive.  

2. 

3. 

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4. 

Reduce  reliance  on  fossil  fuels  by  accelerating  the  deployment  of  renewables, 
improving framework conditions to boost investment in the expansion of electricity 
transmission  and  distribution  grids,  extending  and  accelerating  energy  efficiency 
measures  to  reduce  energy  consumption,  in  particular  in  the  built  environment.  
Support the transition towards sustainable agriculture. 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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