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

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 625 final  Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Slovakia and delivering a Council opinion on the 2023 Stability Programme of Slovakia {SWD(2023) 625 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

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

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.  

1 
2 
3 

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

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(2) 

On 22 November 2022, the Commission adopted the 2023 Annual Sustainable Growth 
Survey4,  marking  the  start  of  the  2023  European  Semester  for  economic  policy 
coordination. The European Council endorsed the priorities of the  survey  around the 
four  dimensions  of  competitive  sustainability  on  23  March  2023.  On  22  November 
2022,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted 
the  2023  Alert  Mechanism  Report,  in  which  it  identified  Slovakia  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  Slovakia’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  (RRPs)  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 

4 
5 
6 

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

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(6) 

(7) 

equally relevant also for recovery and resilience plans revised, updated or amended in 
accordance with Articles 14, 18 and 21 of Regulation (EU) 2021/241.  
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 

7 

8 
9 

Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1). 
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 29 April 2021, Slovakia 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  Slovakia10. 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  Slovakia  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.  On  26  April  2023,  Slovakia  submitted  a  modified  national  RRP, 
including a REPowerEU chapter to the Commission in accordance with Article 21c of 
Regulation  (EU)  2021/241.  The  modified  RRP  also  takes  into  account  the  updated 
maximum financial contribution, in accordance with Article 18(2) of Regulation (EU) 
2021/241  and  includes  a  reasoned  request  to  the  Commission  to  amend  Council 
Implementing  Decision  of  13  July  2021  in  accordance  with  Article  21(1)  of 
Regulation  (EU)  2021/241,  because  Slovakia  considered  the  RRP  to  be  partially  no 
longer achievable due to objective circumstances.  

(10)  On 27 April 2023, Slovakia submitted its 2023 National Reform Programme and, on 
27 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  Slovakia’s  biannual  reporting  on 
the progress made in achieving its recovery and resilience plan.  

(11)  The Commission published the 2023 country report for Slovakia11 on 24 May 2023. It 
assessed  Slovakia’s  progress 
relevant  country-specific 
in  addressing 
recommendations  adopted by  the Council  between 2019  and  2022 and took stock of 
Slovakia’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  Slovakia’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 Slovakia and published its results on 24 May 202312. It concluded 
imbalances.  In  particular, 
that  Slovakia 

is  not  experiencing  macroeconomic 

10 

11 
12 

Council Implementing Decision of 13 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Slovakia (ST 10156/2021; ST 10156/2021 ADD 1; ST 10156/2021 COR 1). 
SWD(2023) 625 final. 
SWD(2023) 643 final. 

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vulnerabilities  relating  to  competitiveness,  housing,  household  debt  and  external 
balance  have  been  increasing,  but  overall  seem  contained  in  the  near  future  and  are 
expected to ease as economic conditions normalise. The economy was strongly hit by 
the energy prices shock with inflation rising fast. Core inflation and unit labour costs 
growth  are  well  above  the  euro  area  average.  While  they  are  forecast  to  normalise, 
there is the risk that pressure on cost competitiveness could take time to unwind, and 
that strong domestic demand will continue to put pressures on external accounts. The 
current account deteriorated markedly in 2022 owing to higher energy import prices as 
well as marked falls in net exports of non-energy goods. The current account deficit is 
forecast  to  improve  mildly  but  to  remain  large  in  2023  and  2024,  despite  the  falling 
energy  prices.  Nonetheless,  external  sustainability  risks  are  assessed  to  be  limited  in 
the near term. Government deficits are forecast to be significant this year and next and 
to correct from 2024. House prices appear to be mildly overvalued after several years 
of marked growth. That occurred alongside high borrowing, which is now cooling, and 
a strong increase in  household  debt,  which altogether present  some risk for financial 
stability. However, the banking sector remains well capitalised, highly profitable and 
recording low non-performing loans. Continued efforts are needed to tackle Slovakia’s 
economic vulnerabilities. In particular, excess demand should be reined in to support 
the correction of the current account deficit and the core inflation differential vis-à-vis 
the  rest  of  the  euro  area.  That  can  be  achieved  by  ensuring  adequate  fiscal 
consolidation  and  measures  to  address  household  debt,  while  retaining  housing 
affordability through property taxation and measures supporting housing supply. 
(13)  Based  on  data  validated  by  Eurostat,13  Slovakia’s  general  government  deficit 
decreased from 5.4% of GDP in 2021 to 2.0% in 2022, while general government debt 
fell from 61.0% of GDP at the end of 2021 to 57.8% 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  Slovakia,  as  its  general  government  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. 
Slovakia  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  expenditure-increasing  measures  included  benefits  for  households  most 
exposed  to  high  inflation,  a  one-time  increase  in  the  child  allowance,  a  one-time 
payment  of  the  "14th  pension",  a  one-time  bonus  paid  to  all  employees  in  public 
sector,  and  capped  electricity  and  gas  prices  for  unregulated  companies.  The  cost  of 
these measures was partly offset by new taxes on windfall profits of energy producers 
and  suppliers,  namely  the  solidarity  contribution  provided  according  to  the  EU 
regulation.  The  Commission  estimates  the  net  budgetary  cost  of  these  measures  at 
0.2% of GDP in 2022. The general government balance has also been impacted by the 

13 

14 

15 

Eurostat-Euro Indicators, 47/2023, 21.4.2023. 

COM(2023) 631 final, 24.5.2023. 

COM(2023) 141 final, 8.3.2023. 

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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 3.2% in 2021. 
(15)  On  18  June  2021,  the  Council  recommended  that  in  2022  Slovakia16  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  fiscal  stance17 

the  Commission  estimates, 

in  2022  was 
contractionary, at 1.3% of GDP which was appropriate in a context of high inflation. 
As  recommended  by  the  Council,  Slovakia  continued  to  support  the  recovery  with 
investments  to  be  financed  by  the  Recovery  and  Resilience  Facility.  Expenditure 
financed by Recovery and Resilience Facility grants and other EU funds amounted to 
1.2% of GDP in 2022 (1.3% of GDP in 2021). The decrease in expenditure financed 
by Recovery and Resilience Facility grants and other EU funds in 2022 was due to the 
low  absorption  of  the  structural  EU  funds  and  postponements  of  the  realised 
expenditures  from  the  Recovery  and  Resilience  Facility  grants.  Nationally  financed 
investment  provided  an  expansionary  contribution  of  0.2  percentage  points  to  the 
fiscal  stance.18  Slovakia  therefore  preserved  nationally  financed  investment,  as 
recommended  by  the  Council.  At  the  same  time,  the  growth  in  nationally  financed 
primary current expenditure (net of new revenue measures) provided a contractionary 
contribution  of  1.3  percentage  points  to  the  fiscal  stance.  Slovakia  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  in  2023  and  thereafter.  The  government  projects  real  GDP  to 
grow by 1.3% in 2023 and 1.8% in 2024. By comparison, the Commission 2023 spring 
forecast projects a higher real GDP growth of 1.7% in 2023 and 2.1% in 2024, mainly 
due  to  a  faster  than  expected  recovery  in  exports  as  supply  chain  bottlenecks  are 
expected  to  disappear  and  the  economic  outlook  of  Slovakia’s  main  export 
destinations improved. 

(18) 

In its 2023 Stability Programme, the government expects that the general government 
deficit  ratio  will  increase  to  6.3%  of  GDP  in  2023.  The  increase  in  2023  mainly 
reflects  the  measures  adopted  to  mitigate  the  economic  and  social  impact  of  the 
increase in energy prices, as well as other measures like increasing the tax bonus and 
child allowances, and introducing a parental bonus. According to the Programme, the 
general government debt-to-GDP ratio is expected to increase from 57.8% at the end 
of 2022 to 58.7% at the end of 2023. The Commission 2023 spring forecast projects a 
government deficit of 6.1% of GDP for 2023. This is in line with the deficit projected 
in  the Stability Programme. The Commission  2023 spring forecast  projects  a  similar 
general government debt-to-GDP ratio, of 58.3% at the end of 2023.  

16 

17 

18 

Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Stability 
Programme of Slovakia, OJ C 304, 29.07.2021, p. 121. 
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  is  provided  an  contractionary  contribution  of  0.1 
percentage points of GDP.  

growth. For  more 

to  medium-term 

see  Box 1 

potential 

relative 

details 

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(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, notably a cap on electricity and 
gas prices for unregulated companies, and new measures such as a cap on electricity, 
gas and heating supply prices for households and for regulated (small) companies. The 
cost of these measures is partly offset by taxes on windfall profits of energy suppliers, 
namely  the  solidarity  contribution  linked  to  the  EU  regulation,  the  special  levy  for 
water  management  construction  company,  and  the  cap  on  revenue  for  electricity 
producers  with  excessive  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. The measures in 2023 do not appear targeted to the 
most vulnerable households or firms, and they do not fully preserve the price signal to 
reduce energy demand and increase energy efficiency. As a result, no targeted support 
measures  are  to  be  taken  into  account  in  the  assessment  of  compliance  with  the 
recommendation for 2023 (compared to 0.2% of GDP in 2022). The budgetary cost of 
temporary protection to displaced persons from Ukraine is projected to decrease by 0.1 
percentage points of GDP 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  Slovakia  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. Slovakia should stand ready to adjust current spending to the 
evolving  situation.  Slovakia  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 
expansionary  (- 6.2%  of  GDP),  in  a  context  of  high  inflation.  This  follows  a 
contractionary fiscal stance in 2022 (1.3% 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 4.4% of GDP to the fiscal stance. 
This  includes  the  reduced  cost  of  the  targeted  support  measures  to  households  and 
firms most vulnerable to energy price hikes by 0.2% of GDP. This also includes lower 
costs  to  offer  temporary  protection  to  displaced  persons  from  Ukraine  (by  0.1%  of 
GDP).  The  expansionary  contribution  of  nationally  financed  net  primary  current 
expenditure is therefore not 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 driven by untargeted energy measures, permanent wage increases 
for  healthcare  professionals,  and  the  reduction  in  VAT  rates  on  the  food  and  leisure 

19 

20 

21 

The  figure represents the level of annual budgetary cost of those  measures, including current revenue 
and expenditure as well as capital expenditure measures. 
Council  Recommendation  of  12  July  2022  on  the  National  Reform  Programme  of  Slovakia  and 
delivering  a  Council  opinion  on  the  2022  Stability  Programme  of  Slovakia  OJ  C  334,  01.09.2022,  p. 
205. 
Based  on  the  Commission  spring  2023  forecast,  the  medium-term  (10-year  average)  potential  output 
growth of Slovakia, which is used to measure the fiscal stance, is estimated at 12.0% in nominal terms. 

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sectors.  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 
is projected to amount to 2.8% of GDP in 2023, while nationally financed investment 
is  projected  to  provide  an  expansionary  contribution  to  the  fiscal  stance  of  0.1 
percentage  points22.  Slovakia  plans  to  finance  additional  investment  through  the 
Recovery  and  Resilience  Facility  and  other  EU  funds,  and  it  projects  to  preserve 
nationally  financed  investment.23  It  plans  to  finance  public  investment  for  the  green 
and  digital  transitions,  and  for  energy  security,  such  as  the  National  Strategy  for 
Research, Development and Innovation, aiming to increase flexibility and shorten the 
time  of  purchasing  services  and  involve  a  wider  range  of  suppliers,  including  small 
and medium-sized companies. 

(22)  According  to  the  Stability  Programme  the  general  government  deficit  is  expected  to 
decline to 4.7% of GDP in 2024. The decrease in 2024 mainly reflects the phasing-out 
of  measures  mitigating  the  economic  and  social  impact  of  the  increase  in  energy 
prices. The programme expects the general government debt-to-GDP ratio to increase 
to 59.3% at the end of 2024. Based on policy measures known at the cut-off date of 
the  forecast,  the  Commission  2023  spring  forecast  projects  a  government  deficit  of 
4.8% of GDP in 2024. This is in line with the deficit projected in the programme. The 
Commission 2023 spring forecast projects a similar general government debt-to-GDP 
ratio, of 58.7% 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 full phasing out  of energy  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.24 
Taking  into  account  fiscal  sustainability  considerations,25  and  the  need  to  reduce  the 
deficit  to  below  the  3%  of  GDP  reference  value,  an  improvement  in  the  structural 
balance  of  at  least  0.7%  of  GDP  for  2024  would  be  appropriate.  To  ensure  such  an 
improvement,  the  growth  in  net  nationally  financed  primary  expenditure26  in  2024 
should not exceed 5.7%, as reflected in this recommendation. This will also contribute 

22 

23 

24 

25 

26 

Other  nationally  financed  capital  expenditure  is  projected  to  provide  an  expansionary  contribution  of 
0.1 percentage points of GDP. 

Expenditure financed by Recovery and Resilience Facility grants and other EU funds amounted to 0.0% 
of  GDP  in  2023,  while  nationally  financed  investment  provided  an  expansionary  contribution  to  the 
fiscal  stance  of  1.3  percentage  points.  Other  nationally  financed  capital  expenditure  is  projected  to 
provide an expansionary contribution of 0.1 percentage points of GDP. 

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  Slovakia  would  need  an  average  annual  increase  in  the  structural 
primary  balance  as  a  share  of  GDP  of  1  percentage  points  to  achieve  a  plausible  debt  reduction  or 
ensure that government debt is kept at prudent levels in the medium term.  This estimate was based on 
the  Commission  autumn  2022  forecast.  The  starting  point  for  this  estimate  was  the  projected 
government  deficit  and  debt  for  2024  which  assumed  the  withdrawal  of  energy  support  measures  in 
2024.  
Net  primary  expenditure  is  defined  as  nationally  financed  expenditure  net  of  discretionary  revenues 
measures and excluding interest expenditure as well as cyclical unemployment expenditure. 

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to reducing core inflation, which is well above the euro area average, and which could 
lead to competitiveness losses if persistent, and strengthening the external position. 

At the same time, the remaining energy support measures (currently estimated by the 
Commission  at  2%  of  GDP  in  2023)  should  be  phased  out,  contingent  on  energy 
market  developments  and  starting  from  the  least  targeted  ones,  and  the  related 
savings  should  be  used  to  reduce  the  government  deficit.  Based  on  Commission 
estimates,  this  would  lead  to  a  growth  in  net  primary  expenditure  below  the 
recommended maximum growth rate for 2024. 

In  addition,  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 2.5% 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  permanent  expenditure  measures  such  as  higher  compensation  of  public 
employees, the family package including a tax bonus and increased child allowances, 
as well as the introduction of a parental bonus under the pension reform. 

(26)  According  to  the  programme,  government  investment  is  expected  to  decrease  from 
5.1% of GDP in 2023 to 4.0% of GDP in 2024. The lower investment reflects lower 
investment financed by the EU, namely through the Structural Funds. The programme 
refers  to  reforms  and  investments,  that  are  expected  to  contribute  to  fiscal 
sustainability and sustainable and inclusive growth. These include a recently approved 
reform introducing expenditure ceilings and pension reform, which are also part of the 
Recovery and Resilience Plan. 

(27)  The Stability Programme outlines a medium-term fiscal path until 2026. According to 
the  programme,  the  government  targets  project  the  deficit  to  reach  3.2%  of  GDP  in 
2025  and  2.2%  in  2026.  The  government  deficit  is  hence  expected  to  fall  below  the 
3% reference value in 2026.  

(28)  Slovakia’s  tax  system  shows  potential  to  be  reformed  to  boost  economic  efficiency, 
promote environmental and fiscal sustainability and improve fairness. The labour tax 
burden is particularly high for low-income earners compared to other EU countries. In 
contrast, environmental and property taxation is not used to its full potential. Changing 
the  tax  mix  could  support  growth  and  also  help  encourage  the  green  transition  and 
environmental  sustainability.  Despite  the  economy’s  high  energy  intensity,  revenue 
from  environmental  taxes  stood  at  2.5%  in  2021,  close  to  the  EU  average. 
Environmental  charges  relating  to  waste  management  and  air  pollution  do  not 
sufficiently  promote  efficient  use  of  resources  and  do  not  reduce  costs  for  the 
environment  and  society.  Environmental  taxes  and  charges  are  not  indexed,  and  this 
reduces  green  revenue  over  time.  Road  taxes  and  vehicle  registration  fees  do  not 
sufficiently reflect emission intensity. Overall, the transport taxation share of total tax 
revenues  is  only  0.58%  (EU  average  1%).  On  property  taxation,  revenues  from 
recurrent  taxes on property  were relatively  low in 2021  (0.5% of GDP,  compared to 
the EU average of 1.2%). Slovakia does not currently have sufficient data to enable the 
property tax base to be updated and indexed in line with market values, although this 
could  also  partly  curb  the  continuing  strong  demand  for  housing  and  related  strong 
house  price  growth.  In  addition,  further  efforts  to  simplify  taxes  and  improve  tax 

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(29) 

compliance can increase public revenues and  in  turn support fiscal sustainability and 
improve  fairness.  In  2020,  the  VAT  tax  compliance  gap  in  Slovakia  continued  its 
downward trend. It fell from 15% in 2019 to 13.9% of total expected VAT revenues in 
2020  but  still  remains  above  the  EU  average  (9.1%).  Further  improvements  in  tax 
administration,  including  in  electronic  invoicing,  pre-filled  tax  returns  and  more 
digitalisation, could help further reduce the leaks in the tax system. 

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. The implementation 
of Slovakia’s recovery and resilience plan has so far been well underway, however it is 
facing  some  challenges  going  forward.  Slovakia  submitted  two  payment  requests, 
corresponding  to  30  milestones  and  targets  in  the  plan  and  resulting  in  an  overall 
disbursement of EUR 1.11 billion. Slovakia has been among the Member States with 
the  fastest  progress  in  the  implementation  of  the  recovery  and  resilience  plan,  but 
potential headwinds due to administrative capacity bottlenecks, together with the need 
to  start  working  on  additional  measures  of  the  REPowerEU  chapter  submitted  by 
Slovakia as part of its plan revision on 26 April 2023, call for strengthened focus on 
implementation. 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  Slovakia’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.  

(30)  The Commission approved all of Slovakia’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 Slovakia. 

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

(32)  Progress by Slovakia in  reducing net  greenhouse gas emissions has largely stalled in 
recent years. The country remains a structurally energy-intensive economy with a high 
dependency on fossil fuel imports. The primary energy intensity of Slovakia stood at 
around  80%  above  the  EU  average  in  2020,  while  its  final  energy  consumption 
increased  by  13.5%  between  2015  and  2021.  Slovakia  achieved  some  progress  on 
energy  import  diversification  in  2022,  but  gas  saving  measures  have  not  been 
sufficiently deployed. Slovakia’s consumption of natural gas has dropped by 1%27 in 
the  period  between  August  2022  and  March  2023,  compared  with  the  average  gas 
consumption  over  the  same  period  in  the  preceding  5  years,  well  below  the  15% 
reduction target. Slovakia is encouraged to enhance efforts to temporarily reduce gas 
demand until  31 March  202428.  The share of imports of natural  gas from  Russia  has 

27 
28 

Data for Slovakia is currently under validation by Eurostat. 
Council Regulation (EU) 2022/1369 and Council Regulation (EU) 2023/706.  

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been reduced from 85% to about 50% since summer 2022. While the reforms included 
in  the recovery  and resilience plan have led to  a significant  increase in  the available 
capacity for connecting renewables to the grid in Slovakia, only a small share of the 
free capacity has been used to connect new renewable installations. A faster uptake of 
renewables  would  help  achieve  climate  goals  and  reduce  Slovakia’s  dependence  on 
fossil  fuel  imports  (including  from  Russia),  easing  the  risk  of  energy  poverty  amid 
volatile energy prices. The cumulative installed capacity of solar and wind energy was 
around 7% of total installed capacity in 2022, the second lowest level in the EU.  

(33)  Slovakia enacted reforms in the area of market design and support  for renewables in 
2022  as  part  of  its  recovery  and  resilience  plan,  but  further  measures  would  allow  a 
faster roll-out of renewables, particularly for wind, solar, geothermal, biomethane and 
hydrogen.  These  include  simplifying  permitting  and  administrative  procedures, 
including  by  establishing  administrative  ‘one-stop-shops’  and  ‘go-to’  areas  for 
renewables.  Slovakia  would  benefit  from  making  the  procedures  for  grid  access  for 
renewables more efficient, in particular by reforming the capacity reservation system, 
making  the  grid  connection  less  administratively  burdensome  and  revising  the  grid 
connection fees, in line with EU benchmarks and best practice. To accommodate the 
increasing  volume  of  intermittent  renewables,  Slovakia  has  large  potential  for 
modernising  its  electricity  networks  (as  regards  both  transmission  and  distribution), 
building  new  electricity  storage  facilities  and  advancing  with  the  creation  of  the 
regulatory  framework  for  renewable  hydrogen.  Further  progress  in  developing 
geothermal  energy  and  biomethane  sectors  would  substitute  for  natural  gas,  widely 
used  as  an  energy  source  in  district  heating  systems  and  where  the  deployment  of 
renewable heat sources remains underdeveloped.  

(34)  While  Slovakia  is  progressing  in  the  energy  efficiency  of  residential  buildings  as  a 
result of ambitious Recovery and Resilience Facility and Cohesion Fund investment, 
more  effort  is  needed,  especially  on  deep  renovations  of  public  and  private  non-
residential buildings, together with renovation measures targeting energy poverty and 
vulnerable households. Slovakia would benefit from addressing several bottlenecks to 
accelerate  building  renovations  and  attract  more  private  investment,  namely  by:  (i) 
adapting  renovation  schemes;  (ii)  providing  technical  assistance;  (iii)  developing  the 
‘one-stop  shop’  approach;  (iv)  collecting  relevant  energy  data  on  public buildings  to 
help  prioritise  investment;  and  (v)  improving  coordination  between  different  public 
authorities  and  funding  programmes.  Additional  effort  is  needed  to  structurally 
address  energy  poverty,  in  particular  through  dedicated  housing  renovation  schemes 
and  technical  and  administrative  assistance  that  reflects  the  needs  of  vulnerable 
households, together with reforms and investment in social housing. Greater ambition 
in  reducing  greenhouse  gas  emissions  and  increasing  targets  for  renewables  and 
energy  efficiency  will  be  needed  for  Slovakia  to  be  in  line  with  the  ‘Fit  for  55’ 
objectives. 

(35)  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. Slovakia has one of the highest shares of employment 
in  the  automotive  manufacturing  and  the  steel  industry  in  the  EU,  sectors  highly 

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(36) 

(37) 

affected  by  the  green  transition.  At  the  same  time,  in  2022,  labour  shortages  were 
reported  for  24  occupations  that  require  green  skills,  including  insulation  workers, 
plumbers  and  pipe  fitters,  as  well  as  building  and  related  electricians.  This  calls  for 
effective  policy  levers  to  accelerate  the  green  transition  across  a  broad  range  of 
sectors, while ensuring fairness.  

In light of the Commission’s assessment, the Council has examined the 2023 Stability 
Programme and its opinion29 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 Slovakia, recommendations (1), (2) and (3) contribute to the 
implementation of the first, second, third and fifth euro area recommendations.  

HEREBY RECOMMENDS that Slovakia 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 5.7%. 

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.  

Make  the  tax  mix  more  efficient  and  more  supportive  of  inclusive  and  sustainable 
growth, including by leveraging the potential of environmental and property taxation. 
Continue  to  strengthen  tax  compliance,  including  by  further  digitalising  the  tax 
administration. 

Reduce  the  risks  related  to  household  debt  by  supporting  housing  supply  and  the 
expansion of the rental market. 

29 

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

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2. 

3. 

Maintain the momentum in the steady implementation of the recovery and resilience 
plan  and  swiftly  finalise  the  addendum,  including  the  REPowerEU  chapter,  with  a 
view 
the  speedy 
implementation  of  cohesion  policy  programmes,  in  close  complementarity  and 
synergy with the recovery and resilience plan. 

implementation.  Proceed  with 

initiating 

rapidly 

its 

to 

Reduce  the  economy’s  reliance  on  fossil  fuels,  in  particular  natural  gas  in  industry 
and  heating,  and  diversify  imports  of  fossil  fuels.  Accelerate  the  deployment  of 
renewables, particularly for wind, solar, geothermal and renewable gases, in line with 
relevant sustainability criteria. Simplify permitting and administrative procedures for 
deploying renewables, including by establishing  ‘one-stop shops’ and ‘go-to’ areas. 
Modernise  the  electricity  network  and  make  the  procedures  for  connecting 
renewables to the grid more efficient and less costly. Accelerate and incentivise deep 
renovations of public and private buildings, address energy poverty through housing 
renovations  for  low-income  households,  and  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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