Council Recommendation of 21 October 2024 on economic, budgetary, employment and structural policies of Estonia
Date: 2024-10-21
Institutions: Council of the European Union
Subjects: Estonia, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, social policy, social security, stability pact








C_202406813EN.000101.fmx.xml












Official Journal of the European Union


EN
C series













C/2024/6813


29.11.2024







            COUNCIL RECOMMENDATION
         
of 21 October 2024
         
on economic, budgetary, employment and structural policies of Estonia
(C/2024/6813)


THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 121(2) and Article 148(4) thereof,


Having regard to Regulation (EU) 2024/1263 of the European Parliament and of the Council of 29 April 2024 on the effective coordination of economic policies and on multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 (1), and in particular Article 3(3) 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 Council (2), which established the Recovery and Resilience Facility (‘the Facility’), entered into force on 19 February 2021. The Facility provides financial support to the Member States for the implementation of reforms and investments, entailing a fiscal impulse financed by the Union. In line with the priorities of the European Semester for economic policy coordination, the Facility helps achieve the economic and social recovery and implement sustainable reforms and investments, in particular reforms and investments to promote the green and digital transitions and to 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 Unionand support the continued implementation of the European Pillar of Social Rights.












(2)


Regulation (EU) 2023/435 of the European Parliament and of the Council (3) (‘the REPowerEU Regulation’), which was adopted on 27 February 2023, aims to phase out the Union's dependence on Russian fossil-fuel imports. This would help achieve energy security and diversify the Union’s energy supply, while increasing the uptake of renewables, energy storage capacities and energy efficiency. Estonia added a new REPowerEU chapter to its national recovery and resilience plan in order to finance key reforms and investments that will help achieve the REPowerEU objectives.












(3)


On 16 March 2023, the Commission issued a communication entitled ‘Long-term competitiveness of the EU: looking beyond 2030’, in order to inform policy decisions and create the framework conditions for increasing growth. The communication frames competitiveness in terms of nine mutually reinforcing drivers. Among those drivers, access to private capital, research and innovation, education and skills, and a functioning single market emerge as paramount policy priorities for reform and investment to address current productivity challenges as well as to build up the long-term competitiveness of the Unionand its Member States. On 14 February 2024, the Commission issued a communication entitled ‘The 2024 Annual Single Market and Competitiveness Report’. That communication details the competitive strengths and challenges of the European single market, tracking yearly developments according to the nine competitiveness drivers identified.












(4)


On 21 November 2023, the Commission adopted the 2024 Annual Sustainable Growth Survey, marking the start of the 2024 European Semester. On 22 March 2024, the European Council endorsed the priorities of the 2024 Annual Sustainable Growth Survey , which are centred around the four dimensions of competitive sustainability. On 21 November 2023, on the basis of Regulation (EU) No 1176/2011 of the European Parliament and of the Council (4), the Commission also adopted the 2024 Alert Mechanism Report, in which it did not identify Estonia 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 2024 draft budgetary plan of Estonia. The Commission also adopted a recommendation for a Council recommendation on the economic policy of the euro area and a proposal for the 2024 Joint Employment Report, which analyses the implementation of the Employment Guidelines and the principles of the European Pillar of Social Rights. The Council adopted the Recommendation on the economic policy of the euro area (5) (‘the 2024 Recommendation on the euro area’) on 12 April 2024 and the Joint Employment Report on 11 March 2024.












(5)


On 30 April 2024, the Union’s new economic governance framework entered into force. The framework includes the new Regulation (EU) 2024/1263 on the effective coordination of economic policies and multilateral budgetary surveillance, the amended Council Regulation (EC) No 1467/97 (6) on speeding up and clarifying the implementation of the excessive deficit procedure, and the amended Council Directive 2011/85/EU (7) on requirements for the budgetary frameworks of Member States. The objectives of the new economic governance framework are to promote sound and sustainable public finances, sustainable and inclusive growth and resilience through reforms and investments, and prevent excessive government deficits. The new economic governance framework also promotes national ownership and has a greater medium-term focus, combined with more effective and coherent enforcement. Each Member State has to submit to the Council and to the Commission a national medium-term fiscal-structural plan. A national medium-term fiscal-structural plan contains the fiscal, reform and investment commitments of a Member State, covering a planning horizon of 4 or 5 years, depending on the regular length of the national legislative term. The net expenditure (8) path in the national medium-term fiscal-structural plans has to comply with the requirements of Regulation (EU) 2024/1263, including the requirements to put or keep general government debt on a plausibly downward path by the end of the adjustment period, or for it to remain at prudent levels below 60 % of gross domestic product (GDP), and to bring and/or maintain the general government deficit below the 3 %-of-GDP Treaty reference value over the medium term. Where a Member State commits to a relevant set of reforms and investments in accordance with the criteria set out in Regulation (EU) 2024/1263, the adjustment period can be extended by up to 3 years. For the purpose of supporting the preparation of those national medium-term fiscal-structural plans, on 21 June 2024, the Commission published guidance on the information to be provided by Member States in their national medium-term fiscal-structural plans and in their annual progress reports. In accordance with Articles 5 and 36 of Regulation (EU) 2024/1263, the Commission transmitted to the Member States reference trajectories and technical information, where applicable. Member States have to submit their national medium-term fiscal-structural plans by 20 September 2024, unless the Member State and the Commission agree to extend the deadline by a reasonable period of time. In accordance with their national legal frameworks, Member States may debate their draft medium-term plans with their national parliaments, may ask the independent fiscal institutions to issue an opinion, and may conduct a consultation of social partners and other national stakeholders.












(6)


In 2024, the European Semester continues to evolve in line with the implementation of the Facility. The full implementation of the recovery and resilience plans remains essential for delivering the policy priorities under the European Semester, as the plans help effectively address all or a significant subset of challenges identified in the relevant country-specific recommendations issued in recent years. The 2019, 2020, 2022 and 2023 country-specific recommendations remain equally relevant for the recovery and resilience plans which have been revised, updated or amended in accordance with Articles 14, 18 and 21 of Regulation (EU) 2021/241.












(7)


On 18 June 2021, Estonia 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 set out in Annex V to that Regulation. On 29 October 2021, the Council adopted its Implementing Decision on the approval of the assessment of the recovery and resilience plan for Estonia (9), which was amended on 16 June 2023 pursuant to Article 18(2) of Regulation (EU) 2021/241 to update the maximum financial contribution for non-repayable financial support, as well as to include the REPowerEU chapter (10). The release of instalments is conditional on the adoption of a decision by the Commission, in accordance with Article 24(5) of Regulation (EU) 2021/241, stating that Estonia 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.












(8)


On 25 April 2024, Estonia submitted its 2024 National Reform Programme and, on 30 April 2024, its 2024 Stability Programme, in line with Article 4(1) of Council Regulation (EC) No 1466/97 (11). In accordance with Article 27 of Regulation (EU) 2021/241, the 2024 National Reform Programme also reflects Estonia’s biannual reporting on the progress made in achieving its recovery and resilience plan.












(9)


On 19 June 2024, the Commission published the 2024 country report for Estonia. It assessed Estonia’s progress in addressing the relevant country-specific recommendations adopted by the Council between 2019 and 2023 and took stock of Estonia’s implementation of the recovery and resilience plan. On the basis of that analysis, the country report identified gaps with regard 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 Estonia’s progress in implementing the European Pillar of Social Rights and in achieving the Unionheadline targets on employment, skills and poverty reduction, as well as progress in achieving the United Nations Sustainable Development Goals.












(10)


According to data validated by Eurostat, Estonia’s general government deficit increased from a deficit of 1,0 % of GDP in 2022 to a deficit of 3,4 % in 2023, while the general government debt rose from 18,5 % of GDP at the end of 2022 to 19,6 % at the end of 2023. As announced in the Commission’s communication of 8 March 2023 entitled ‘Fiscal policy guidance for 2024’, the Commission is taking the first step for the opening of deficit-based excessive deficit procedures on the basis of the outturn data for 2023, in line with existing legal provisions. On 19 June 2024, the Commission issued a report under Article 126(3) of the Treaty. That report assessed the budgetary situation of Estonia, as its general government deficit in 2023 exceeded the 3 %-of-GDP Treaty reference value. The report concluded that, in light of that assessment, and after considering the opinion of the Economic and Financial Committee formulated pursuant to Article 126(4) of the Treaty, the Commission will not propose in July 2024 to open an excessive deficit procedure for Estonia.












(11)


On 12 July 2022, the Council recommended (12) that Estonia take action to ensure in 2023 that the growth of nationally financed primary current expenditure is in line with an overall neutral fiscal policy stance, taking into account continued temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. Estonia was recommended to stand ready to adjust current spending to the evolving situation. Estonia 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 Facility and other Union funds. In 2023, according to the Commission estimates, the fiscal stance (13) was expansionary by 1,6 % of GDP, in a context of high inflation. The growth in nationally financed primary current expenditure (net of discretionary revenue measures) in 2023 provided an expansionary contribution to the fiscal stance of 1,0 % of GDP. This includes the 0,1 %-of-GDP reduction in the cost of the targeted emergency support measures for households and firms most vulnerable to energy price hikes, as well as the 0,2 %-of-GDP reduction in the cost of offering temporary protection to displaced persons from Ukraine. The expansionary contribution of nationally financed net primary current expenditure in 2023 was therefore only partly due to the support to people fleeing Ukraine. The expansionary growth in nationally financed primary current expenditure (net of discretionary revenue measures) was driven by higher public wage spending and pensions coupled with further new permanent spending programmes for defence, education and child benefits, not matched by proportional increases on the revenue side. In sum, the growth of nationally financed primary current expenditure in 2023 was not in line with the Council Recommendation of 12 July 2022. Expenditure financed by grants under the Facility and other Unionfunds amounted to 1,4 % of GDP in 2023. Nationally financed investment amounted to 5,8 % of GDP in 2023, with an annual increase of 1,4 percentage points from 2022. Estonia financed additional investment through the Facility and other Union funds. Estonia financed public investment for the green and digital transitions and for energy security, such as the development of event services and a digital gateway for entrepreneurs, the capitalisation of the Green Fund (which makes investments in venture capital funds and equity investments in enterprises) and the strengthening of the electricity grid to increase renewable energy production capacity and adapt to climate change. That public investment is funded by the Facility.












(12)


In the 2024 Stability Programme, the macroeconomic scenario underpinning the budgetary projections projects real GDP growth at 0,0 % in 2024 and 2,0 % in 2025, while projecting inflation measured by the harmonised index of consumer prices (HICP) at 3,6 % in 2024 and 2,7 % in 2025. The general government deficit is expected to increase to 3,5 % of GDP in 2024 (14) and 3,0 % of GDP in 2025, while the general government debt-to-GDP ratio is set to increase to 22,6 % by the end of 2024 and 24,9 % by the end of 2025. After 2025, the general government deficit is projected to decrease gradually to 2,2 % of GDP in 2026, 1,4 % in 2027, and 0,8 % in 2028. Therefore, the general government balance is planned to not exceed the 3 %-of-GDP Treaty reference value from 2025. In turn, after 2025, the general government debt-to-GDP ratio is projected to increase to 26,2 % in 2026 and then decrease gradually to 26,0 % in 2027, and 25,0 % in 2028.












(13)


The Commission’s 2024 spring forecast projects real GDP to contract by 0,5 % in 2024 and to grow by 3,1 % in 2025, and inflation measured by HICP to stand at 3,4 % in 2024 and 2,1 % in 2025.












(14)


The Commission’s 2024 spring forecast projects a government deficit of 3,4 % of GDP in 2024, while the general government debt-to-GDP ratio is set to increase to 21,4 % by the end of 2024. The increase of the debt-to-GDP ratio in 2024 mainly reflects the impact of the government deficit. According to the Commission’s estimates, the fiscal stance is projected to be broadly neutral at 0,1 % of GDP in 2024.












(15)


Expenditure amounting to 0,9 % of GDP is expected to be financed by non-repayable support (‘grants’) under the Facility in 2024, compared to 0,3 % of GDP in 2023, according to the Commission's 2024 spring forecast. Expenditure financed by grants under the Facility will enable high-quality investment and productivity-enhancing reforms without a direct impact on the general government balance or debt of Estonia.












(16)


On 14 July 2023, the Council recommended (15) that Estonia ensure a prudent fiscal policy, in particular by limiting the nominal increase in net nationally financed primary expenditure in 2024 to not more than 4,9 %. When executing their 2023 budgets and preparing their draft budgetary plans for 2024, Member States were invited to take into account that the Commission would propose to the Council the opening of deficit-based excessive deficit procedures on the basis of the outturn data for 2023. According to the Commission’s 2024 spring forecast, Estonia’s structural balance is projected at -0,7 % of GDP in 2024 (compared to -1,3 % of GDP in 2023), thereby at the country's medium-term budgetary objective (MTO) of a structural balance of -0,75 % of GDP. Estonia is therefore assessed as being in line with what was recommended by the Council.












(17)


Moreover, the Council recommended that Estonia take action to wind down the emergency energy support measures in force, using the related savings to reduce the government deficit, as soon as possible in 2023 and 2024. The Council further recommended that, if renewed energy price increases necessitate new or continued support measures, Estonia ensure that such support measures are targeted at protecting vulnerable households and firms, are fiscally affordable, and preserve incentives for energy savings. According to the Commission’s 2024 spring forecast, the net budgetary cost (16) of emergency energy support measures is estimated at 0,2 % of GDP in 2023 and projected at 0,0 % in 2024 and 2025. The emergency energy support measures have been wound down in 2023 and 2024. This is in line with the Council recommendation.












(18)


In addition, the Council also recommended that Estonia preserve nationally financed public investment and ensure the effective absorption of grants under the Facility and of other Unionfunds, in particular to foster the green and digital transitions. According to the Commission’s 2024 spring forecast, nationally financed public investment is projected to increase from 5,8 % of GDP in 2023 to 6,3 % of GDP in 2024. This is in line with what was recommended by the Council.












(19)


On the basis of the policy measures known at the cut-off date of the forecast and on a no-policy-change assumption, the Commission’s 2024 spring forecast projects a government deficit of 4,3 % of GDP in 2025. The increase in the deficit in 2025 mainly reflects the net impact of a reform to personal income tax that is expected to reduce government revenues. The general government debt-to-GDP ratio is set to increase to 24,6 % by the end of 2025. The increase in the debt-to-GDP ratio in 2025 mainly reflects the impact of the government deficit.












(20)


Estonia’s tax revenue as a share of GDP increased in 2023 but is significantly below the Union’s average, limiting the funding available for public expenditure on healthcare, long-term care and social protection. In 2022, revenues from property taxes, which are among the taxes least detrimental to growth, amounted to only 0,3 % of GDP, around seven times lower than the Union average. Estonia collected less than a third of the Union’s average from capital taxes (2,7 % of GDP), had some of the lowest transport taxes in the Union, and is one of the few Member States without an annual car tax. Furthermore, the tax burden is unevenly distributed, and forthcoming tax reforms are set to further increase inequality. More specifically, in 2025 an increase in the income tax rate from 20 % to 22 % and an increase in the basic tax exemption, together with a widening of its scope to cover all income taxpayers, are set to be regressive. Moreover, Estonia’s labour income tax, even if close to the Unionaverage at 17,2 % of GDP, is regressive, taxing higher income levels at a lower effective rate. Public spending on social protection decreased in 2022 and is still significantly below the Union average. This translates into relatively low levels and limited coverage of social benefits, with old-age pensions among the lowest in the Union. Expenditure on general public services is, at 3,7 % of GDP, almost two thirds lower than the Unionaverage.












(21)


Estonia has adopted several reforms to improve the accessibility and affordability of long-term care and healthcare. While the reforms are going in the right direction, sustainable funding for long-term care and healthcare is not yet ensured. As a result, out-of-pocket payments remain high and the unmet need for medical care has increased. Access to medical care is uneven across the country, in particular because of the lack of capacity and resources across municipalities to provide enough services to meet the demand. While the demand is not fully met, public spending on long-term care and healthcare is still among the lowest in the Union. This is coupled with workforce shortages in those sectors. Due to demographic changes, demand for access to long-term care and healthcare is expected to increase. It is therefore necessary to ensure adequate funding for both.












(22)


In accordance with Article 19(3), point (b), of Regulation (EU) 2021/241 and criterion 2.2 of Annex V, to that Regulation, the recovery and resilience plan includes an extensive set of mutually reinforcing reforms and investments to be implemented by 2026. Those reforms and investments are expected to help effectively address all or a significant subset of challenges identified in the relevant country-specific recommendations. Within this tight timeframe, proceeding swiftly with the effective implementation of the recovery and resilience plan, including the REPowerEU chapter, is essential to boost Estonia’s long-term competitiveness through the green and digital transitions, while ensuring social fairness. To deliver on the commitments of the recovery and resilience plan by August 2026, it is essential for Estonia to continue the implementation of reforms and investments. The systematic involvement of local and regional authorities, social partners, civil society and other relevant stakeholders remains essential in order to ensure broad ownership for the successful implementation of the recovery and resilience plan.












(23)


As part of the mid-term review of the cohesion policy programmes, in accordance with Article 18 of Regulation (EU) 2021/1060 of the European Parliament and of the Council (17), Estonia is required to review each programme supported by the European Regional Development Fund (ERDF), the European Social Fund Plus (ESF+), the Cohesion Fund and the Just Transition Fund (JTF) by March 2025, taking into account, among other things, the challenges identified in the 2024 country-specific recommendations, as well as its national energy and climate plan. That review forms the basis for the definitive allocation of the Unionfunding included in each programme. Estonia has made progress in implementing cohesion policy programmes and the European Pillar of Social Rights, but challenges remain and disparities persist between the capital and the rest of Estonia. Accelerating the implementation of the cohesion policy programmes is crucial. The priorities agreed in the cohesion policy programmes continue to be relevant. It is particularly important to increase the competitiveness of companies, especially those outside the metropolitan area, and boost their capacity to innovate. Improving the energy efficiency of private and public buildings as well as of businesses is a high priority. Access to employment through active and preventive labour market measures and the promotion of a healthy work environment continue to be important. Priority should also be given to improving the quality, effectiveness and labour market relevance of education and training; promoting lifelong learning, especially flexible upskilling and reskilling as well as active inclusion; and increasing the accessibility, effectiveness and resilience of long-term care services. As part of the mid-term review of cohesion policy programmes, the needs related to the accessibility and quality of long-term care, while prioritising independent living, merit further attention. Estonia could also leverage the Strategic Technologies for Europe Platform, established by Regulation (EU) 2024/795 of the European Parliament and of the Council (18), specifically in relation to investment in net-zero technologies manufacturing and supporting the transformation of the industry, for instance, in the areas of deep tech innovation, green and digital technologies, and biomedicine. Estonia could also increase its capacity to process rare earth metals and to engage in research and development supporting it.












(24)


Beyond the economic and social challenges addressed by the recovery and resilience plan and other Union funds, Estonia faces several additional challenges related to social protection, resource efficiency and skills.












(25)


The social protection for supporting older people, persons with disabilities and people in non-standard forms of work and with short work spells remains weak. As a result, the share of persons with disabilities at risk of poverty and social exclusion not only increased in 2022 but was the second highest in the Union. Old-age poverty has been rising, and was one of the highest in the Unionin 2022, mainly because pensions are still low in comparison with work incomes. The low adequacy of the social safety net results in high and increasing income inequality, despite a few improvements in previous years. The low coverage of unemployment benefits, especially for those in non-standard forms of work and with short work spells, exacerbates income inequality and poverty. Although the duration of unemployment benefits has been adjusted under the Estonian recovery and resilience plan, the extension of the coverage has yet to be implemented. Rising inequality is linked to the significant increase in prices and the cost of living, which has not been accompanied by a corresponding increase in social benefits and minimum wages. The situation for low-income households has worsened due to high and persistent inflation in the past, and is set to deteriorate further as a result of the tax reforms in 2024–2025. Ensuring adequate mitigation measures, including for pensions, and increasing the adequacy of the social protection system could reduce poverty and inequalities. All those measures would also contribute to supporting upward social convergence, in line with the Commission’s second-stage country analysis based on the features of the Social Convergence Framework, which was piloted in 2024. In line with Article 3(3), point (b), of Regulation (EU) 2024/1263, the European Semester has to include the surveillance of the implementation of the employment guidelines by the Commission, inter alia via a framework to identify risks to social convergence.












(26)


The share of oil shale in Estonia’s energy mix remains significant and is hindering the green transition. Further deployment of renewable energy production is needed to help gradually phase out oil shale while at the same time keeping a high degree of energy independence. In addition to causing environmental damage, the oil shale industry accounts for 90 % of Estonia’s hazardous waste. Estonia has one of the lowest resource productivity rates among Member States, which could be partially due to the country’s resource-intensive oil shale industry, as well as the overall resource-intensive industrial system. Resource productivity barely increased from 1 EUR/kg of resources used to 1,1 EUR/kg, remaining at less than half the Union average in 2022. The sector of land use, land use change and forestry has become a CO2 emitter instead of an absorber. The forestry sector is characterised by high felling volumes, as well as by low resource valorisation. Estonia would benefit from increasing the efficiency of sustainable forest management, further transitioning towards a circular economy, and improving waste management. Furthermore, resource productivity is one of Estonia’s weaknesses with regard to the country’s innovation capacity. Estonia ranked 13th on the 2022 Eco-Innovation Scoreboard (115,5 versus a Union average of 121,5, relative to a Union average of 100 in 2013). Boosting eco-innovation and bio-based innovation for sustainable use of natural resources will help to improve Estonia’s resource productivity and competitiveness.












(27)


Skills shortages and mismatches exist in many sectors and reduce Estonia’s competitiveness. Businesses have identified the lack of skilled staff as a barrier to investment and to their export potential. Shortages of skilled labour and large skills mismatches coincide with rapid wage growth and increased unit labour cost. Both the green and digital transitions have increased demand for workers with specialised skills, while shortages in healthcare and education remain acute and are exacerbatedby the ageing of the workforce. At the same time, relatively high rates of both early school leaving and dropout in higher education result in an insufficient number of skilled graduates. This problem has a particular regional dimension, as rural and remote areas face more difficulties in attracting qualified professionals. Skills mismatches could be limited through further improving the labour market relevance of the education and training system, investing in career guidance, addressing the gender pay gap, increasing opportunities for reskilling and upskilling, and better anticipating skills needs. Given the need for the economy to diversify into activities with high added value, better ways to retain and attract talent would also help.












(28)


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, in 2024 the Council recommended that euro-area Member States take action, including through their recovery and resilience plans, to implement the 2024 Recommendation on the euro area. For Estonia, recommendations (1), (2), (3) and (4) help implement the first, second, third, and fourth recommendations set out in the 2024 Recommendation on the euro area.





HEREBY RECOMMENDS that Estonia take action in 2024 and 2025 to:








1.


Submit the medium-term fiscal-structural plan in a timely manner. In line with the requirements of the reformed Stability and Growth Pact, limit the growth in net expenditure (19) in 2025 to a rate consistent with, inter alia, reducing the general government deficit below the 3 %-of-GDP Treaty reference value and keeping the general government debt at a prudent level over the medium term. Broaden the tax base and improve access to and the financing of healthcare and long-term care.










2.


Continue with the swift and effective implementation of the recovery and resilience plan, including the REPowerEU chapter, ensuring the completion of reforms and investments by August 2026. Accelerate the implementation of the cohesion policy programmes. In the context of the mid-term review of those programmes, continue focusing on the agreed priorities, taking action to better address the needs in the long-term care sector, while considering the opportunities provided by the Strategic Technologies for Europe Platform initiative to improve competitiveness.










3.


Strengthen social protection, inter alia to address old-age poverty and by extending the coverage of unemployment benefits, in particular to those with short work spells and in non-standard forms of work.










4.


Reduce the share of oil shale in the energy mix and raise resource productivity through bio-based innovation. Improve labour productivity and skills supply through reskilling and upskilling, and by better attracting and retaining talent.







Done at Luxembourg, 21 October 2024.


For the Council


The President


               NAGY I.





(1)  
            OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj.

(2)  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, ELI: http://data.europa.eu/eli/reg/2021/241/oj).

(3)  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, ELI: http://data.europa.eu/eli/reg/2023/435/oj).

(4)  Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances (OJ L 306, 23.11.2011, p. 25, ELI: http://data.europa.eu/eli/reg/2011/1176/oj).

(5)  Council Recommendation of 12 April 2024 on the economic policy of the euro area (OJ C, C/2024/2807, 23.4.2024, ELI: http://data.europa.eu/eli/C/2024/2807/oj).

(6)  Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (OJ L 209, 2.8.1997, p. 6, ELI: http://data.europa.eu/eli/reg/1997/1467/oj).

(7)  Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States (OJ L 306, 23.11.2011, p. 41, ELI: http://data.europa.eu/eli/dir/2011/85/oj).

(8)  Net expenditure as defined in Article 2, point (2) of Regulation (EU) 2024/1263: ‘net expenditure’ means government expenditure net of (i) interest expenditure, (ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds, (iv) national expenditure on co-financing of programmes funded by the Union, (v) cyclical elements of unemployment benefit expenditure, and (vi) one-offs and other temporary measures.

(9)  ST 12532/21 INIT; ST 12532/21 ADD 1.

(10)  Council Implementing Decision of 16 June 2023 amending the Council Implementing Decision of 29 October 2021 on the approval of the assessment of the recovery and resilience plan for Estonia (ST 9367/2023 INIT; ST 9367/23 ADD 1).

(11)  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 policies (OJ L 209, 2.8.1997, p. 1, ELI: http://data.europa.eu/eli/reg/1997/1466/oj).

(12)  Council Recommendation of 12 July 2022 on the 2022 National Reform Programme of Estonia and delivering a Council opinion on the 2022 Stability Programme of Estonia (OJ C 334, 1.9.2022, p. 44).

(13)  The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of the general government. It aims to assess the economic impulse stemming from fiscal policies, both those that are nationally financed and those that are financed by the Union budget. The fiscal stance is measured as the difference between (i) the medium-term potential growth and (ii) the change in primary expenditure net of discretionary revenue measures (and excluding temporary emergency measures related to the COVID-19 crisis) and including expenditure financed by non-repayable support (grants) under the Facility and other Union funds.

(14)  The Estonian authorities informed the Commission that the government agreed to, and sent to the national parliament on 5 June 2024, a supplementary budget for 2024 (State 2024 Additional Budget Act 456 SE), which passed the first reading in the national parliament on 10 June, the second on 14 June and is expected to pass the third reading on 19 June 2024. This supplementary budget is expected to reduce the nominal deficit by 0,4 % of GDP (of which, most are permanent expenditure cuts, but also includes revenue-increasing measures).

(15)  Council Recommendation of 14 July 2023 on the 2023 National Reform Programme of Estonia and delivering a Council opinion on the 2023 Stability Programme of Estonia (OJ C 312, 1.9.2023, p. 49).

(16)  The figure represents the level of the annual budgetary cost of those measures, including revenue and expenditure and, where applicable, net of the revenue from taxes on windfall profits of energy suppliers.

(17)  Regulation (EU) 2021/1060 of the European Parliament and of the Council of 24 June 2021 laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, the Just Transition Fund and the European Maritime, Fisheries and Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the Internal Security Fund and the Instrument for Financial Support for Border Management and Visa Policy (OJ L 231, 30.6.2021, p. 159, ELI: http://data.europa.eu/eli/reg/2021/1060/oj).

(18)  Regulation (EU) 2024/795 of the European Parliament and of the Council of 29 February 2024 establishing the Strategic Technologies for Europe Platform (STEP), and amending Directive 2003/87/EC and Regulations (EU) 2021/1058, (EU) 2021/1056, (EU) 2021/1057, (EU) No 1303/2013, (EU) No 223/2014, (EU) 2021/1060, (EU) 2021/523, (EU) 2021/695, (EU) 2021/697 and (EU) 2021/241 (OJ L, 2024/795, 29.2.2024, ELI: http://data.europa.eu/eli/reg/2024/795/oj).

(19)  According to Article 2, point (2), of Regulation (EU) 2024/1263, ‘net expenditure’ means government expenditure net of interest expenditure, discretionary revenue measures, expenditure on programmes of the Union fully matched by revenue from Union funds, national expenditure on co-financing of programmes funded by the Union, cyclical elements of unemployment benefit expenditure, and one-offs and other temporary measures.


ELI: http://data.europa.eu/eli/C/2024/6813/oj
ISSN 1977-091X (electronic edition)