Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Czechia
Date: 2024-11-26
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Czechia, budget deficit, coordination of EMU policies, economic reform, fiscal policy, investment, macroeconomics, national planning, public debt, structural adjustment

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   EUROPEAN COMMISSION  Strasbourg, 26.11.2024  COM(2024) 711 final  Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Czechia  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

endorsing the national medium-term fiscal-structural plan of Czechia 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 121 thereof, 

Having regard to Regulation (EU) 2024/1263, and in particular Article 17 thereof, 

Having regard to the recommendation from the Commission, 

Whereas: 

GENERAL CONSIDERATIONS 

(1) 

(2) 

1 

2 

3 

4 

A reformed EU economic governance framework entered into force on 30 April 2024. 
Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary 
surveillance1,  together  with  the  amended  Regulation  (EC)  No  1467/97  on  the 
implementation  of  the  excessive  deficit  procedure2,  and  the  amended  Council 
Directive  2011/85/EU  on  the  budgetary  frameworks  of  Member  States3  are  the  core 
elements of the reformed EU economic governance framework. The framework aims 
at  ensuring  public  debt  sustainability  and  sustainable  and  inclusive  growth  through 
reforms  and  investments.  It  promotes  national  ownership  and  has  a  medium-term 
focus, combined with an effective and coherent enforcement of the rules. 

The  national  medium-term  fiscal-structural  plans  that  Member  States  submit  to  the 
Council  and  to  the  Commission  are  at  the  centre  of  the  new  economic  governance 
framework. The plans are to deliver on two objectives: i) ensuring that, by the end of 
the adjustment period, general government debt is on a plausibly downward trajectory, 
or stays at  prudent  levels,  and that the government  deficit is  brought and maintained 
below the reference value of 3% of GDP over the medium term, and ii) ensuring the 
delivery  of  reforms  and  investments  responding  to  the  main  challenges  identified  in 
the context of the European Semester and addressing the common priorities of the EU. 
To that end, each plan is to present a medium-term commitment to a net expenditure4 

1466/97 

(OJ  L, 

(EC)  No 

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 
30.4.2024,  ELI: 
2024/12651263, 
Council  Regulation 
http://data.europa.eu/eli/reg/2024/1263/ojttp://data.europa.eu/eli/dir/2024/1265/oj). 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1264/oj). 
Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements 
for  budgetary 
(OJ  L,  2024/1265,  30.4.2024,  ELI: 
http://data.europa.eu/eli/dir/2024/1265/oj). 
Net expenditure as defined in Article 2 of Regulation (EU) 2024/1263, namely government expenditure 
net  of  (i)  interest  expenditure,  (ii)  discretionary  revenue  measures,  (iii)  expenditure  on  Union 
programmes fully matched by revenue from Union funds,  (iv) national expenditure on co-financing of 

the  Member  States 

frameworks  of 

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path, which effectively establishes a budgetary constraint for the duration of the plan, 
covering four or five years (depending on the regular term of legislature in a Member 
State).  In  addition,  the  plan  is  to  explain  how  the  Member  State  will  ensure  the 
delivery  of  reforms  and  investments  responding  to  the  main  challenges  identified  in 
the  context  of  the  European  Semester,  in  particular  in  the  country-specific 
recommendations  (including  those  pertaining  to  the  macroeconomic  imbalances 
procedure (MIP), if applicable), and how the Member State will address the common 
priorities of the Union. The period for fiscal adjustment covers a period of four years, 
which  may  be  extended  by  up  to  three  years  if  the  Member  State  commits  to 
delivering a set of relevant reforms and investments that satisfies the criteria set out in 
of Regulation (EU) 2024/1263. 

(3) 

(4) 

Following the submission of the plan, the Commission is to assess whether it complies 
with the requirements of Regulation (EU) 2024/1263. 

Upon  a  recommendation  from  the  Commission,  the  Council  is  to  then  adopt  a 
recommendation to set the net  expenditure path  of the Member State concerned and, 
investment  commitments 
the  set  of  reform  and 
where  applicable,  endorses 
underpinning an extension of the fiscal adjustment period. 

CONSIDERATIONS  CONCERNING  THE  NATIONAL  MEDIUM-TERM  FISCAL-
STRUCTURAL PLAN OF CZECHIA 

(5) 

On  16  October  2024,  Czechia  submitted  its  national  medium-term  fiscal-structural 
plan to the Council and to the Commission. The submission took place following an 
extension  of  the  deadline  set  out  in  Article  36  of  Regulation  (EU)  2024/1263,  as 
agreed  with  the  Commission  on  24  September  in  view  of  the  reasons  provided  by 
Czechia. 

Process prior to the submission of the plan 

(6) 

Prior  to  the  submission  of  its  plan,  Czechia  requested  technical  information5,  which 
the Commission provided on 21 June 2024 and published on 16 October 20246. In line 
with  Articles  9(1),  point  (c),  and  9(2)  and  16(2)  of  Regulation  (EU)  2024/1263,  the 
technical information indicates the level of the structural primary balance in 2028 that 
is necessary to ensure that the general government deficit is maintained below 3% of 
GDP over the medium term and that the general government debt remains below 60% 
of GDP over the medium term, in the absence of further budgetary measures beyond 
the 4-year adjustment period. The medium term is defined as the ten-year period after 

5 

6 

programmes funded by the Union, (v) cyclical elements of unemployment benefit expenditure and (vi) 
one-offs and other temporary measures.  
Prior  guidance  transmitted  to  the  Member  States  and  Economic  and  Financial  Committee  includes 
technical information i) without and with an extension of the adjustment period (covering 4 and 7 years, 
respectively), and ii) with and without the deficit resilience safeguard. It also includes the main initial 
conditions  and  underlying  assumptions  used  in  the  Commission’s  medium-term  government  debt 
projection  framework.  The  reference  trajectory  was  calculated  on  the  basis  of  the  methodology 
described 
(https://economy-
finance.ec.europa.eu/publications/debt-sustainability-monitor-2023_en).  It  is  based  on  the  European 
Commission  Spring  2024  Forecast  and  its  medium-term  extension  up  to  2033,  and  long-term  GDP 
growth  and  ageing  costs  are  in  line  with  the  joint  Commission-Council  2024  Ageing  Report 
(https://economy-finance.ec.europa.eu/publications/2024-ageing-report-economic-and-budgetary-
projections-eu-member-states-2022-2070_en). 
https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/national-medium-term-fiscal-
structural-plans_en#czechia 

the  Commission’s  Debt 

Sustainability  Monitor 

2023 

in 

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the  end  of  the  adjustment  period.  The  technical  information  was  prepared  and 
transmitted to the Member State under two scenarios: a scenario including consistency 
with  the  deficit  resilience  safeguard7,  in  line  with  Article  9(3)  of  Regulation  (EU) 
2024/126,  and  a  scenario  without  this  safeguard.  The  technical  information  for 
Czechia  sets  out  that,  in  order  to  comply  with  the  applicable  fiscal  rules  over  an 
adjustment  period  of  4  years,  and  based  on  the  Commission’s  assumptions,  the 
structural  primary  balance  should  amount  to  at  least  0.4%  of  GDP  at  the  end  of  the 
adjustment period (2028; scenario without the deficit resilience safeguard), as per the 
following table. For information, considering also the deficit resilience safeguard, the 
structural  primary  balance  should  amount  to  at  least  0.4%  of  GDP  at  the  end  of  the 
adjustment  period  (2028).  However,  the  deficit  resilience  safeguard  is  not  a 
requirement for Czechia, which is eligible for technical information. 

Table 1: Technical information provided by the Commission to Czechia 

Final year of the adjustment period 

Minimum value of the structural primary balance (% of GDP), scenario without the deficit 
resilience safeguard 

For information only: Minimum value of the structural primary balance (% of GDP), scenario 
with the deficit resilience safeguard 

Source: Commission’s calculations. 

2028 

0.4 

0.4 

(7) 

(8) 

In  line  with  Article  12  of  Regulation  (EU)  2024/1263,  Czechia  and  the  Commission 
engaged in  a technical  dialogue from  June to  September 2024. The dialogue centred 
on the net expenditure path envisaged by Czechia and its underlying assumptions (in 
particular  potential  GDP  growth  projections),  as  well  as  the  envisaged  delivery  of 
reforms and investments responding to the main challenges identified in the context of 
the  European  Semester  and  the  common  priorities  of  the  Union  in  fair  green  and 
digital transition, social and economic resilience, energy security and the build-up of 
defence capabilities. 

In  September  and  October  2024,  in  line  with  Article  11(3)  and  36(1),  point  (c)  of 
Regulation (EU) 2024/1263, according to the information provided by  Czechia in its 
plan,  Czechia  engaged  in  a  consultation  process  with  civil  society,  social  partners, 
regional  authorities  and  other  relevant  stakeholders.  According  to  the  information 
provided  by  Czechia  in  its  plan,  the  process  included  a  proper  inter-ministerial 
consultation  involving  the  economic  and  social  partners.  In  addition,  a  roundtable 
discussion  on  the  draft  plan  was  held  with  representatives  of  economic  and  social 
partners, non-profit sector, regions, both chambers of the Parliament and other relevant 
institutions, including the Czech Fiscal Council. Moreover, draft plan was provided to 
the  Government  Council  for  Sustainable  Development  and  the  Government  Council 
for  Non-Governmental  Organisations.  The  plan  was  also  discussed 
two 
parliamentary committees. Finally, representatives of the economic and social partners 

in 

7 

The deficit resilience safeguard established in Article 8 of Regulation (EU) 2024/1263 establishes that 
the annual improvement in the structural primary balance is of 0.4 percentage points of GDP (or 0.25 
percentage points of GDP in case of an extension of the adjustment period) until the structural deficit is 
lower than 1.5% of GDP. 

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were  able  to  present  their  views  at  the  Working  Party  of  the  Economic  and  Social 
Agreement Council. 

(9) 

The Committee on Budgetary Forecasts, tasked with assessing the macroeconomic and 
budgetary 
forecast 
underpinning  the  multi-annual  net  expenditure  path.  The  Committee  assessed  the 
macroeconomic forecast as realistic. 

forecasts,  delivered  an  opinion  on 

the  macroeconomic 

(10)  The  plan  was  discussed  in  the  national  parliament  on  8  October  2024.  It  was 

consequently adopted by the government on 16 October 2024. 

Other related processes 

(11)  On  21  October  2024,  the  Council  addressed  to  Czechia  a  series  of  country-specific 

recommendations (CSRs) in the context of the European Semester8. 

SUMMARY OF THE PLAN AND THE COMMISSION’S ASSESSMENT THEREOF 

(12) 

In  line  with  Article  16  of  Regulation  (EU)  2024/1263,  the  Commission  assessed  the 
plan as follows: 

Context: macroeconomic and fiscal situation and outlook 

(13)  Economic  activity  in  Czechia  declined  by  0.1%  in  2023,  as  high  inflation  eroded 
purchasing  power  and  led  to  declining  household  consumption.  According  to  the 
European  Commission  Autumn  2024  Forecast,  the  economy  is  expected  to  grow  by 
1.0% in  2024, on the back of a gradual  recovery in  domestic demand driven by real 
wage growth and declining inflation. In 2025, real GDP is set to increase by 2.4% as 
household  consumption  and  investment  growth  accelerates,  while  net  exports 
contribute  negatively.  In  2026,  real  GDP  is  expected  to  increase  by  2.7%,  driven  by 
growth  in  household  consumption  and  gross  fixed  capital  formation  as  well  as  a 
recovery in exports. Over the forecast horizon (i.e., 2024-2026), potential GDP growth 
in Czechia is expected to increase slightly, from 1.6% in 2024 to 1.8% in 2026, driven 
by  increasing  productivity  and  higher  capital  investments,  while  the  labour 
contribution  is  declining.  The  unemployment  rate  stood  at  2.6%  in  2023  and  is 
projected by the Commission to amount to 2.6% in 2024, 2.7% in 2025 and 2.7% in 
2026. Inflation (GDP deflator) is projected to decrease from 8.2% in 2023 to 4.0% in 
2024, and to reach 2.4% in 2025 and 2.4% in 2026. 

(14)  Regarding  fiscal  developments,  in  2023  Czechia’s  general  government  deficit 
amounted  to  3.8%  of  GDP.  According  to  the  European  Commission  Autumn  2024 
Forecast, it is set to reach 2.5% of GDP in 2024 and to decline further to 2.3% of GDP 
in 2025 and, on a no-policy change basis, to 1.9% in 2026. The European Commission 
Autumn 2024 Forecast includes Czechia’s draft budget for 2025 that the government 
proposed  to  the  national  parliament  in  September.  General  government  debt  was 
42.4%  of  GDP  at  end-2023.  According  to  the  European  Commission  Autumn  2024 
Forecast,  the  debt  ratio  is  expected  to  increase  to  43.4%  of  GDP  at  end-2024.  It  is 
projected  to  increase  further  to  44.4%  of  GDP  at  end-2025  and  44.8%  at  end-2026. 
The fiscal  forecast  by the Commission  does not  consider the policy commitments  in 
the medium-term plans as such until they are underpinned by credibly announced and 
sufficiently specified concrete policy measures. 

Net expenditure path and main macroeconomic assumptions in the plan 

8 

Council Recommendation on economic, budgetary, employment and structural policies of Czechia, not 
yet published. 

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(15)  Czechia’s  national  medium-term  fiscal-structural  plan  covers  the  period  2025-2028 

and presents a fiscal adjustment over four years. 

(16)  The  plan  contains  the  information  required  by  Article  13  of  Regulation  (EU) 
2024/1263,  with  the  exception  of  the  planned  fiscal-structural  measures  in  the  outer 
years of the plan. 

(17)  The plan commits  to the net  expenditure path  indicated in  Table 2, corresponding to 
average net expenditure growth of 3.1% over the years 2025-2028. The 
technical 
information  (assuming  a  linear  adjustment  path)  is  consistent  with  an  average  net 
expenditure  growth  of  3.5%  over  the  adjustment  period  (2025-2028).  The  net 
expenditure  path  committed  to  in  the  plan  is  reported  to  lead  to  a  structural  primary 
balance of 0.4% of GDP at the end of the adjustment period (2028). This is equal to 
the minimum level of the structural primary balance of 0.4% of GDP in 2028 provided 
June  20249. 
by 
The  plan  assumes  potential  GDP  growth  to  decrease  from  2.0%  in  2024  to  1.4%  in 
2025 before increasing slightly to reach 1.6% on average over  the adjustment period 
(2025-2028).  In  addition,  the  plan  expects  the  growth  rate  of  the  GDP  deflator  to 
decrease  from  3.4%  in  2024  to  2.7%  in  2025,  and  to  decrease  gradually  further  to 
2.0% by 2028. 

information  on  21 

the  Commission 

technical 

the 

in 

Table 2: Net expenditure path and main assumptions in Czechia’s plan  

2024 

2025 

2026 

2027 

2028 

Net expenditure growth 
(annual, %) 

Net expenditure growth 
(cumulative, from base 
year 2023, %) 

Potential GDP growth 
(%) 

Inflation (GDP deflator 
growth) (%) 

5.3 

4.5 

2.5 

2.6 

2.9 

5.3 

10.1 

12.9 

15.8 

19.2 

2.0 

1.4 

1.5 

1.8 

1.5 

3.4 

2.7 

2.2 

2.1 

2.0 

Average over 
the period of 
validity of the 
plan 

2025-2028 

3.1 

n.a. 

1.6 

2.2 

Source: Medium-term fiscal-structural plan of Czechia and Commission calculations. 
Implications of the plan’s net expenditure commitments for general government debt  

(18) 

If the net  expenditure path  committed to  in  the plan and the underlying assumptions 
materialise,  general  government  debt  would,  according  to  the  plan,  increase  from 
44.1% in 2024 to 45.3% of GDP in 2026, and decrease thereafter to 44.2% of GDP at 
the end of the adjustment period (2028), as per the following table. Over the medium 
term, i.e. until 2038, the debt ratio is expected to broadly stabilise until 2033 according 
to the plan and increase thereafter to 47.5% of GDP in 2038. 

9 

In the scenario without the deficit resilience safeguard. 

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Table 3: General government debt and balance developments in Czechia’s plan  

2023 

42.4 

2024 

44.1 

2025 

45.1 

2026 

45.3 

2027 

44.7 

2028 

44.2 

2038 

47.5 

-3.8 

-2.8 

-2.5 

-1.7 

-0.9 

-0.5 

-2.6 

Government debt 

(% of GDP) 

Government 
balance 

(% of GDP) 

Source: Medium-term fiscal-structural plan of Czechia 

Thus, according to the plan, general government debt would stay below the Treaty reference 
value  of  60%  of  GDP  over  the  medium  term.  Therefore,  based  on  the  plan’s  policy 
commitments  and  macroeconomic  assumptions,  the  net  expenditure  path  put  forward  in  the 
plan is consistent with the requirement for debt as set out in Article 16(2) of Regulation (EU) 
2024/1263. 

Implications  of  the  plan’s  net  expenditure  commitments  for  the  general  government 
balance 

(19)  Based  on  the  plan’s  net  expenditure  path  and  assumptions,  the  general  government 
deficit  would  gradually  improve  from  2.8%  of  GDP  in  2024  to  0.5%  of  GDP  at  the 
end of the adjustment period (2028).  Thus,  according 
the  general 
government balance would not exceed the 3% of GDP reference value at the end of the 
adjustment period (2028). In addition, in the ten years following the adjustment period 
(i.e.  until  2038),  the  government  deficit  would  not  exceed  3%  of  GDP.  Therefore, 
based  on  the  plan’s  policy  commitments  and  macroeconomic  assumptions,  the  net 
expenditure  path  put  forward  in  the  plan  is  consistent  with  the  requirement  for  the 
deficit as set out in Article16(2) of Regulation (EU) 2024/1263. 

the  plan, 

to 

Macroeconomic assumptions of the plan 

(20)  The  plan  is  based  on  a  set  of  assumptions  which  differs  from  the  Commission’s 
assumptions  transmitted  to  Czechia  on  [21  June  2024].  In  particular,  the  plan  uses 
different assumptions for eight variables, namely the starting point (structural primary 
balance  in  2024),  potential  GDP  growth,  real  GDP  growth,  GDP  deflator  growth, 
nominal (implicit) interest rate, fiscal multiplier, stock-flow adjustments, and revenue 
assumptions (i.e.  assumed elasticities). An assessment of these different  assumptions 
is provided below. 

(21)  The  differences  in  assumptions  with  the  most  significant  impact  on  average  net 
expenditure  growth  are  listed  below,  together  with  an  assessment  of  each  difference 
considered in isolation.  

• 

The plan assumes the starting point (structural primary balance in 2024) at –0.7% of 
GDP,  which  is  lower  than  the  Commission  assumption  of  –0.1%  of  GDP.  This 
contributes  to  lower  average  net  expenditure  growth  over  the  adjustment  period  in 
the plan than according to the Commission’s assumptions. This is explained by more 
recent information compared with the Commission’s assumptions, including a lower 
estimate  for  the  general  government  balance  in  2024  (–2.8%  of  GDP  in  the  plan 
compared to –2.4% of GDP according to the European Commission’s assumptions). 
This  is  broadly  in  line  with  the  Commission  2024  Autumn  forecast.  Consequently, 
this assumption is deemed to be duly justified.  

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• 

• 

• 

The  plan  assumes  potential  GDP  growth  at  1.6%  on  average  over  the  adjustment 
period (2025-2028). This contributes to higher average net expenditure growth over 
the adjustment period in the plan than according to the Commission’s assumptions. 
After  the  end  of  the  adjustment  period  (2029-2038),  the  potential  growth  series 
converges  towards  the  Commission’s  assumptions,  resulting  in  a  higher  average 
potential growth for the plan than the Commission assumptions (1.4% compared to 
1.3%).  The  deviation  until  2028  is  explained  by  Czechia’s  more  favourable  short-
term  macroeconomic  projections  in  the  plan,  and  a  slight  upward  GDP  growth 
revision  for  2023.  Furthermore,  the  plan  indicates  that  potential  growth  estimates 
include as input the plan’s macroeconomic forecast of August 2024 for the horizon 
up  to  2028.  In  addition,  the  cumulated  growth  over  the  projection  horizon  remains 
broadly in line with the results of the commonly agreed methodology. Consequently, 
this assumption is deemed to be duly justified. 

The  plan  assumes  GDP  deflator  growth  to  be  lower  by  0.5  pp  on  average  over  the 
projection  horizon  than  the  Commission’s  assumption.  This  contributes  to  lower 
average net expenditure growth over the adjustment period in the plan than according 
to  the  Commission’s  assumptions.  This  more  cautious  assumption  than  in  the 
Commission’s prior guidance is  explained in  the plan by the incorporation of more 
recent data, by assuming the 2% inflation target (CPI growth) to be reached by mid-
2026,  and  by  assuming  the  GDP  deflator  to  converge  to  this  value  in  2028  and 
remaining  stable  at  2028  values  over  the  remaining  projection  horizon.  This 
assumption is deemed to be duly justified. 

The  plan  assumes  the  nominal  (implicit)  interest  rate  to  be  lower  by  0.6  pp  on 
average  over  the  projection  horizon  than  the  Commission’s  assumption.  This 
contributes  to  higher average net  expenditure growth over the adjustment period in 
the  plan  than  according  to  the  Commission’s  assumptions.  The  deviation  follows 
from the assumption of lower market interest rates for the short term and long term 
by  about  1  pp,  which  represents  a  more  optimistic  assumption  compared  to  the 
Commission’s. This is explained by the incorporation of more recent data, and by a 
different  method,  which  is  based  on  an  expectation  of  a  decline  in  market  interest 
rates in line with the path of the central bank’s base rate. The deviation follows also 
from  slightly  more  favourable  assumption  of  real  GDP  growth  in  the  plan 
(denominator effect). Consequently, this assumption is deemed to be duly justified. 

The  remaining  differences  in  assumptions  do  not  have  a  significant  impact  on 
average  net  expenditure  growth  compared 
the  European  Commission’s 
assumptions.  Overall,  all  the  differences  taken  together  lead  to  an  average  net 
expenditure growth that is lower in the plan than the average net expenditure growth 
implied by the technical information. Moreover, in its plan, Czechia commits to a net 
expenditure path that is even lower than this ceiling. The European Commission will 
take  into  account  the  above  assessment  of  the  plan’s  assumptions  in  future 
assessments of compliance with this recommendation. 

to 

Fiscal strategy of the plan 

(22)  The  plan  does  not  include  an  indicative  fiscal  strategy  to  implement  the  net 
expenditure path of the plan, as that path is only set as a technical ceiling that Czechia 
commits not to exceed. The precise specification of the relevant policy measures is to 
be confirmed or adjusted and quantified in the annual budgets. 

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Reform  and  investment  intentions  in  the  plan  responding  to  the  main  challenges 
identified in the context of the European Semester and addressing the common priorities 
of the Union 

(23)  The plan describes policy intentions concerning reforms and investments to respond to 
the main challenges identified in the context of the European Semester, especially the 
CSRs addressed to Czechia, and to address the common priorities of the EU. The plan 
includes  128  reforms  and  investments,  of  which  78  are  financially  supported  by  the 
Recovery and Resilience Facility, and 85 by the cohesion policy funds. 

(24)  Concerning  the  common  priority  of  a  fair  green  and  digital  transition,  including  the 
climate  objectives  set  out  in  Regulation  (EU)  2021/1119,  the  plan  includes  63 
measures, of which 52 are supported by the RRF. The measures to address challenges 
of  the  green  transition  are  included  in  the  National  Energy  and  Climate  Plan  of  the 
Czech Republic. The most important measures include the reforms LEX RES I and II, 
which streamline permitting and construction of renewable energy sources, introduce 
energy communities, and launch the Energy Data Centre. Soon, the LEX RES III will 
provide for a more flexible electricity system.  Regarding energy efficiency, the New 
Green  Savings  and  the  New  Green  Savings  Light  programmes  support  in-depth 
renovation of buildings. Other relevant measures include electrification of train tracks 
and replacement of vehicles with more emission-efficient ones. These measures intend 
to  address  CSRs  in  the  policy  area  of  renewable  energy,  energy  infrastructure  and 
networks, and energy efficiency (addressed to Czechia in 2019, 2020, 2022 and 2023), 
and sustainable transport (addressed to Czechia in 2019, 2020 and 2023). Concerning 
challenges  of  digital  transition,  the  most  important  measures  include  reforms  and 
investments  to  develop  5G infrastructure in  rural  and high-need areas, to expand 5G 
signal coverage, including on transport corridors and trains, and to support industrial 
R&D projects using 5G. These measures relate to (2019 and 2020) CSRs in the policy 
area of digital connectivity and infrastructure. 

(25)  Concerning  the  common  priority  of  social  and  economic  resilience,  including  the 
European  Pillar  of  Social  Rights,  the  plan  includes  48  measures,  of  which  23  are 
supported  by  the  RRF.  Concerning  challenges  to  smart,  sustainable  and  inclusive 
growth,  the  most  important  measures  include  draft  law  on  research,  development, 
innovation and knowledge transfer, investments in digitalization of enterprises, and the 
National Public Procurement Strategy. These measures intend to address (2019, 2020 
and 2024) CSRs in  the policy area of business  environment  including  SME policies, 
and research & innovation, and the 2019 CSR on quality-based competition in public 
procurement.  Concerning  challenges  to  social  and  territorial  cohesion,  the  most 
important measures include the amendment of the first pillar of the pension system, a 
pilot testing of a new tool ‘the integration workplace’, the increase in the capacity of 
pre-school  childcare  services,  retraining  in  digital  skills,  and  the  development  of 
digital education. Other relevant measures include the amended Construction Act, and 
draft Act on Housing Support. These measures concern (2019, 2022, 2023 and 2024) 
CSRs to ensure the long-term fiscal sustainability of the pension system, 2020 CSRs in 
the  areas  of  active  labour  market  policies  and  social  inclusion,  the  2019  CSR  to 
improve access to affordable childcare, 2019 and 2020 CSRs to foster digital skills and 
access  to  digital  learning,  and  2022  and  2023  CSRs  on  the  provision  of  social  and 
affordable  housing.  The  plan  does  not  include  measures  aimed  at  provision  and 
acquisition  of  skills  and  competences  needed  for  the  green  transition  addressing  the 
2023 CSR on education and training. The plan does not include measures to lower tax 
and  benefit  disincentives  for  parents  to  return  to  work  addressing  the  2024  CSR  on 

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promoting higher female labour market participation. Concerning challenges to health, 
and economic, social and institutional resilience, the most important measures include 
the Whistleblower Protection Act, and the draft Act on Lobbying Regulation, a human 
resources  action  plan  for  central  government  authorities,  and  the  increase  and 
indexation of recurrent taxes on immovable property. These measures tackle the 2019 
CSR  to  adopt  pending  anti-corruption  measures,  the  2024  CSR  to  strengthen  the 
capacity  of  Czechia's  public  administration  to  attract,  retain  and  develop  talent,  and 
2024  CSR  to  increase  revenue  from  recurrent  property  taxes.  The  plan  does  not 
include measures in the healthcare sector addressing the 2019 CSR to improve long-
term  fiscal  sustainability  of  the  health-care  system.  Concerning  policies  for  the  next 
generation,  the  most  important  measures  include  the  increase  of  the  quality  and 
accessibility  of  pre-school  education,  the  support  of  integration  of  children  of  third 
country  nationals,  the  ongoing  reform  of  teacher  training,  and  the  strengthening  of 
inclusion  in  education.  These  measures  tackle  the  2019  CSR  to  increase  the  quality 
and inclusiveness of the education. The plan does not include measures in the higher 
education  sector  addressing  the  2024  CSR  on  increasing  participation  in  tertiary 
education. 

(26)  Concerning  the  common  priority  of  energy  security,  the  plan  includes  measures  that 
intend to address this common priority, none of which are supported by the RRF. The 
most important measures include the lease of capacities of the LNG terminals and the 
completion of TAL+ project in view of phasing away from Russian fossil fuels. These 
measures  are  expected  to  tackle  the  2022  CSR  to  diversify  imports  of  fossil  fuel.  In 
addition,  the  government  takes  steps  to  replace  the  existing  units  of  the  Dukovany 
Nuclear Power Plant. 

(27)  Concerning  the  common  priority  of  defence  capabilities,  the  plan  includes  increased 
defence  spending  to  around  2%  of  GDP  in  2024,  in  alignment  with  NATO 
commitments.  

(28)  The  plan  provides 

information  on 

the  consistency  and,  where  appropriate, 
complementarity,  with  the  cohesion  policy  funds  and  Czechia’s  recovery  and 
resilience  plan  (RRP).  The  dominant  part  of  the  measures  included  in  the  plan  is 
financed  by  the  RRF.  The  plan  and  annex  to  the  plan  comprehensively  map  the 
reforms and investments on the cohesion policy funds and the RRP. 

(29)  The  plan  provides  an  overview  of  the  public  investment  needs  of  Czechia  regarding 
the common priorities of the EU. Regarding the common priority of a fair green and 
digital  transition,  including  consistency  with  the  European  Climate  Law,  investment 
needs include transformation of the energy sector, development  of  renewable energy 
sources,  reducing  energy  consumption  and  emissions  of  buildings,  developing  5G 
mobile  network  infrastructure,  and  simplifying  access  to  digital  public  services.  To 
ensure social and economic resilience, Czechia plans to invest in innovative start-ups 
and  growing  companies,  facilitate  retraining  and  further  education,  and  increase 
capacity of childcare. To increase energy security, Czechia intends to support applied 
research in energy. 

Conclusion of the Commission’s assessment 

(30)  Overall, the Commission is of the view that Czechia’s plan fulfils the requirements of 

Regulation (EU) 2024/1263. 

OVERALL CONCLUSION 

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(31) 

In accordance with Article 17 of Regulation (EU) 2024/1263, the net expenditure path 
as set in the plan should be recommended by the Council to Czechia. 

HEREBY RECOMMENDS that CZECHIA 

(1) 

Ensure  that  net  expenditure  growth  does  not  exceed  the  maxima  established  in 
Annex I to this Recommendation. 

In  addition,  the  Council  invites  Czechia  to  ensure  the  delivery  of  reforms  and  investments 
responding  to  the  main  challenges  identified  in  the  context  of  the  European  Semester,  in 
particular in the country-specific recommendations, and addressing the common priorities of 
the Union.  

ANNEX I 
Maximum growth rates of net expenditure 
(annual and cumulative growth rates, in nominal terms) 
Czechia 

Years 

2025 

2026 

2027 

2028 

Growth rates 

Annual 

4.5 

2.5 

2.6 

2.9 

(%) 

Cumulative (*) 

10.1 

12.9 

15.8 

19.2 

(*) The cumulative growth rates are calculated by reference to the base year of 2023. 

Done at Strasbourg, 

For the Council 
The President 

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