Recommendation for a COUNCIL RECOMMENDATION on the economic policy of the euro area
Date: 2024-12-17
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: competitiveness, euro area, financial stability, fiscal policy, investment promotion, labour market, macroeconomics, stability pact, structural adjustment, sustainable development

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   EUROPEAN COMMISSION  Strasbourg, 17.12.2024  COM(2024) 704 final  Recommendation for a COUNCIL RECOMMENDATION on the economic policy of the euro area {SWD(2024) 704 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic policy of the euro area 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 136 in conjunction with Article 121(2) thereof, 

Having regard to Regulation (EU) 2024/1263 of the European Parliament and the Council of 
29  April  2024  on  the  effective  coordination  of  economic  policies  and  on  multilateral 
budgetary surveillance and repealing Council Regulation (EC) No 1466/971, and in particular 
Article 3(3)(a) 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 conclusions of the European Council, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas:  

(1) 

to  address 

the  Union's 

lagging  productivity, 

On  4  November  2024,  the  Eurogroup  issued  a  statement  emphasizing  the  need  for 
urgent  action 
innovation,  and 
competitiveness  through  ambitious  investment  and  structural  reforms.  This  call  to 
action  was  subsequently  reinforced  by  the  European  Council,  which  issued  a 
declaration  on  8  November.  The  Eurogroup  statement  and  the  European  Council 
declaration  reflect  the  broad  conclusions  of  the  Draghi  and  Letta  reports34  and 
demonstrate  a  shared  understanding  of  the  challenges  and  opportunities  the  Union’s 
economy  is  facing.  They  provide  the  context  for  the  implementation  of  the  new 
Economic Governance Framework (‘the framework’), which entered into force on 30 
April  2024.  The  framework  aims  at  ensuring  public  debt  sustainability  and  promote 
sustainable  and  inclusive  growth  through  reforms  and  priority  investments.  The 
medium-term plans submitted by Member States to date put the emphasis on reforms 
and  investments  aimed  at  improving  competitiveness.  The  framework  acknowledges 
the role of the Council  recommendation on the economic policy of the  euro area,  as 
part  of  the  European  Semester  for  economic  policy  coordination,  to  provide  an 
assessment  of  macroeconomic  policy  for  the  euro  area,  including  both  on  fiscal  and 
non-fiscal  aspects.  By  highlighting  key  macro-structural  as  well  as  institutional 

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4 

OJ L 1263, 30.4.2024, p. 1. 
OJ L 306, 23.11.2011, p. 25.  
‘Much more than a market,’ April 2024 (Letta Report). 
‘The Future of European Competitiveness, Part A and B,’ September 2024 (Draghi Report). 

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(2) 

(3) 

challenges, priorities and recommendations collectively addressed to the euro area as a 
whole  and  its  Member  States,  this  Recommendation  provides  a  platform  for  policy 
discussion on areas of common interest of the euro area Member States. 

The  euro  area  has  displayed  remarkable  macroeconomic  resilience  weathering  rapid 
disinflation  with  minimal  impact  on  employment.  The  euro  area's  ability  to  absorb 
shocks  and  rebound,  as  seen  in  its  response  to  the  COVID-19  and  the  energy  crisis, 
has  also  contributed  to  this  positive  outcome.  This  resilience  is  largely  due  to  the 
timely policy response by the Union, including by the European Central Bank (ECB), 
and  the  Member  States,  which  helped  to  cushion  the  economy  in  the  face  of  major 
crises. In that respect, the sound fiscal situation in several Member States in 2019, the 
swift activation of the general escape clause of the Stability and Growth Pact, and new 
Union  instruments  such  as  NextGenerationEU  and  SURE  alongside  the  Multiannual 
Financial  Framework  (‘MFF’)  provided  the  euro  area  with  crucial  fiscal  space, 
allowing  an  effective  fiscal  response.  The  structural  transformation  of  the  euro  area 
over the last decade also  enhanced its resilience.  Labour markets  have become more 
flexible,  and  financial  systems  demonstrated  far  greater  robustness  than  during  the 
Global  Financial  Crisis.  In  the  post  COVID-19  period,  private  consumption  has 
benefitted from the strong labour market and policy-response driven transfers, though 
the  savings  rate  has  remained  high.  Public  investment  has  been  bolstered  by  the 
Recovery and Resilience Facility (‘RRF’) and other Union funds. Private investment 
has been much less dynamic, especially since 2022 in a context of tightening financial 
conditions  and  widespread  global  macroeconomic  uncertainty.  Meanwhile,  the 
contribution of net exports to the GDP growth has been slightly positive due to weak 
import  dynamics  while,  more  recently,  exports  have  been  affected  by  growing  trade 
fragmentation and restrictions. Going forward, after 0.4% in 2023, real GDP growth is 
expected to  remain subdued at  around 0.8% in  2024 but  to  pick up to  1.3% in  2025 
and 1.6% in 2026. Stronger private consumption is expected to drive the acceleration 
in  activity  in  2025  and  2026  on  the  back  of  sustained  though  slower  real  wage 
increases and employment growth. Over the next 2 years, total investment is expected 
to  increase  more  gradually  supported  by  strong  national  and  EU-financed  public 
investment, while a pickup in external demand is expected to support exports.  

Headline  inflation  surged  in  the  wake  of  the  energy  crisis  to  high  levels  (peaking  at 
10.6%  in  October  2022  for  the  euro  area  average),  but  it  is  projected  to  decrease  to 
2.1%  in  2025  and  further  decline  to  1.9%  in  2026.  Inflation  differentials  in  the  euro 
area, which widened in 2022 have also narrowed in the meantime and are expected to 
remain  close  to  historical  averages.  The  disinflation  process  largely  reflects  an 
unwinding  of  the  exogenous  forces  that  had  led  to  strong  increases  in  the  prices  of 
energy,  food,  and  services  over  the  past  three  years.  It  also  shows  the  impact  of  the 
decisive policy actions taken by the ECB. In response to the initial inflation surge, the 
ECB implemented a series of interest rate increases and begun winding down its asset 
purchases, aiming to keep inflation expectations anchored and rein in prices. While the 
degree  of  monetary  policy  restriction  has  been  recently  moderating,  policy  rates  are 
expected  to  remain  sufficiently  restrictive  for  as  long  as  necessary  to  ensure  that 
inflation returns to the ECB’s 2% medium-term target. 

(4) 

Labour  markets  remained  strong  in  2024  despite  weakening  economic  activity. 
Employment has risen by 3 million in the euro area between the end of 2022 and mid-
2024 and  the number of jobs  reached  a record.  Employment growth  has been strong 
across  age  groups,  gender,  and  level  of  educational  attainment.  Labour  force 
participation also increased, reaching a new high in 2024 though challenges remain for 

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(5) 

(6) 

women,  younger  and  older  workers,  Roma  and  people  with  disabilities.  Like  many 
other advanced economies, the euro area has benefited from large migration inflows, 
including from Ukraine and other areas, which contributed to labour supply and help 
to  reduce  labour  shortages  in  some  industries.  The  euro  area  unemployment  rate 
stabilized  at  around  the  historically  low  6.3%  in  October  2024.  The  rising  trend  in 
labour  and  skills  shortages  implied  by  a  shrinking  working-age  population  and  new 
skills  demand  and  compounded  by  the  rapid  recovery  from  the  pandemic-induced 
recession  has  recently  declined  somewhat  but  significant  labour  shortages  remain  in 
multiple  industries.  Strong  corporate  profits,  and  balance  sheet  dynamics  have 
contributed to robust labour demand. Recently, the share of firms declaring that labour 
is a factor limiting their production, and the job-vacancy rate have dropped from their 
historical peaks, although they remain high and above pre-pandemic levels.  

In  2023  and  2024,  nominal  wages  have  increased  on  the  back  of  a  high  inflation 
environment  and  a  tight  labour  market.  In  the  second  quarter  of  2024,  nominal 
compensation per employee grew by 4.5% (euro area average) compared to the same 
period in 2023, a slightly lower rate than what observed in 2023. The Commission’s 
Autumn  2024  Forecast  estimates  robust  nominal  wage  growth  in  2024,  with 
moderation expected in 2025. Real wages, which declined in 2022 and in the first half 
of 2023, began to recover in the third quarter of 2023. The increase in the profit share 
in recent years, and its subsequent decline, suggests that firms are absorbing increases 
in wages by reducing profit margins instead of raising prices. Therefore, the ongoing 
gradual  recovery  in  real  wages  largely  reflects  catching-up  dynamics  and  appears 
consistent  with  a  return  to  the  2%  medium-term  inflation  target  and  with  well-
anchored inflation expectations. Incomes at the bottom of the income distribution were 
supported by both government transfers and minimum wage increases over the recent 
year. However, further efforts are needed to promote adequate wages and quality jobs 
as  the  risk  of  poverty  remains  only  marginally  lower  than  in  2019  and  financial 
distress of workers remains high after increasing during the energy crisis, for both the 
lowest and the lower middle-income households.  

these  challenges  requires  a  multifaceted  approach 

The  euro  area  has  long-standing  structural  issues,  including  stagnant  productivity, 
limited  innovation  and  limited  diffusion  of  digital  technologies,  high  energy  prices, 
and administrative burden, which impact its competitiveness. Total factor productivity 
growth – a metric of productivity that removes the increase in employment and capital 
– has stagnated over the past decades, more so than in other international peer regions 
such  as  the  United  States,  raising  concerns  about  the  euro  area’s  ability  to  maintain 
competitiveness  in  a  global  environment  marked  by  rapid  technological  change. 
includes 
Addressing 
accelerating  innovation  and  the  development  of  advanced  digital  and  clean 
technologies and infrastructures, including by encouraging the adjustment of business 
models  and  tackling  of  skills  shortages  as  well  as  by  improving  access  to  digital 
infrastructure,  where  necessary.  Furthermore,  facilitating  the  diffusion  of  innovation 
across industries and firms, increasing skills in the labour force, in particular green and 
digital  skills,  reducing  administrative  burden,  deepening  the  single  market,  while 
integrating  the  capital  markets  of  the  Union  remain  also  crucial.  In  addition,  higher 
energy  prices  than  international  peers  erode  the  cost  competitiveness  of  several 
industries.  This  puts  firms  at  a  disadvantage,  particularly  for  what  concerns  energy-
intensive industries relying on oil and gas. 

that 

(7) 

The Union stands out at global level in terms of fundamental (or basic) research, has 
comparable  levels  of  public  spending  on  R&D  vis-à-vis  its  competitors,  but  lags  in 

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artificial 

the  green 

intelligence 

transition,  digitalisation, 

applied research and in the translation to marketable products, particularly in high-tech 
digital innovation. It is of paramount importance that the euro area and the Union do 
not fall behind other major economies for what concerns the current innovation trends, 
including 
(AI), 
semiconductors  and  quantum  computing,  space  and  biotechnology.  In  view  of  their 
growing  importance,  developing  capacities  in  strategic  digital  technologies  and 
exploiting  our  strengths  are  crucial  to  reinforcing  EU  technological  sovereignty  and 
resilience  and maintaining our  open  strategic autonomy. Additionally, barriers to  the 
mobility  of  knowledge  and  talent  across  European  countries  can  hinder  the  full 
realization  of  the  Union's  potential  in  innovation,  productivity,  and  competitiveness. 
Boosting  productivity  will  demand  an  acceleration  in  innovation  and  boosting  R&D 
investment  particularly  by  the  private  sector,  including  through  sufficient  and  well-
calibrated public R&D investments that can leverage private R&D efforts. Investing in 
human capital has become vital as economies face the pressures of rapid technological 
change. While tertiary educational attainment in Europe is improving overall, there is 
a  concerning  decline  in  basic  skills  performance  among  younger  people  and  far  too 
limited progress in adult participation in learning, hampering education outcomes and 
productivity  growth  in  the  near  future.  Moreover,  the  dual  transition  towards 
digitalisation and greening requires the development of new skills, from basic to more 
advanced  and  specialised  skills.  All  these  needs  addressing  with  targeted  education 
and training initiatives. By prioritising education, training, and skills development, the 
Union can boost innovation, productivity, and competitiveness.  

(8) 

Union’s companies need supportive conditions to facilitate economies of scale, foster 
their growth and scale-up and help them thrive in global markets. Surveys indicate that 
the  complexity  of  the  regulatory  environment,  cumulative  reporting  obligations  and 
complicated tax rules often weigh on companies’ investment decisions and expansion 
prospects in the euro area and the Union. Geopolitical tensions, trade restrictions, and 
economic security concerns, affecting access to critical raw materials and technologies 
also impact their growth. Accelerating the transition to a more circular economy would 
help  tackle  critical  raw  material  shortage  and  fostering  investment  with  our 
international  partners  can  further  strengthen  the  competitiveness  of  the  European 
industry 5,. Mobilising resources for sectors displaying potential for high productivity 
growth  require  the  removal  of  bottlenecks  to  capital  and  labour  reallocation.  In  the 
energy market, sufficient grid interconnections and the efficient use of existing ones, 
in particular cross-border, are crucial for connecting producers and consumers across 
wide  geographic  areas.  In  addition,  increasing  energy  efficiency  and  the  deployment 
and  use  of  renewable  and  other  low-carbon  technologies,  also  through  energy 
communities, is crucial to enable demand response, increase the role of flexibility and 
contribute to the reduction of energy costs. The elimination of administrative barriers 
and  facilitating  permits  can  support  business  activity  and  investment.  Structural 
reforms supported by Union funds, including the RRF, help boosting Member States' 
competitiveness. Sustainable growth and development contribute to reduce disparities 
between the European regions. However, the full potential of the Single Market, more 
than  30  years  after  its  creation,  remains  under-exploited.  Policies  to  enhance 
productivity  at  national  level  could  be  better  identified,  prioritised,  and  coordinated. 
Not all Member States have established National Productivity Boards to this purpose 

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Including with the Global Gateway initiative and Team Europe approach.    

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(9) 

or  made  an  effective  use  of  their  potential.  Intensifying  regulatory  convergence  and 
economic  integration  could  boost  private  investment,  productivity,  and  innovative 
capacity,  as  well  as  diversification  and  the  security  of  supply  chains  for  Union 
companies.  The  Union  will  also  need  to  carefully  navigate  the  possible  trade-offs 
between  engaging  further  in  open  trade  and  strengthening  economic  security,  the 
achievement  of the goals  of the Clean  Industrial Deal  while warranting  global  level-
playing fields through further usage of trade defence instruments against unfair trade 
practice.  These  calls  for  a  coordinated  approach  and  policy  complementarity  at  both 
the Member State and Union levels.   

Savings  in  the euro area  are abundant.  If channelled  towards  productive  investments 
via capital markets, they may provide significant financing support for the green and 
digital transformations, helping to close the competitiveness gap. In recent years, tight 
bank-based financing conditions made it more difficult to invest as a large part of euro 
area companies rely on the banking sector as a source of financing. However, the cost 
of credit to companies is decreasing, aligning with the decline in policy rates. Venture 
capital  and  non-bank  financing,  especially  for  innovative  companies,  is  not  as 
available as in the United States. Although public investment, with the support of the 
RRF  and  other  Union  funds,  can  play  a  role,  the  challenge  of  enhancing  euro  area 
competitiveness,  together  with  supporting  green  and  digital  investment  entail  large 
private financing needs. Fragmented capital markets cannot provide the adequate scale 
of financing matching this investment challenge. A European Savings and Investments 
Union,  as  suggested  by  the  Letta  and  Draghi  Reports,  could  foster  greater 
complementarity between the Capital Markets Union and the Banking Union and help 
leverage  the  enormous  wealth  of  private  savings  to  provide  adequate  investment 
opportunities.  This  could  overall  contribute  to  easier  financing  for  innovation, 
industrial  decarbonisation,  and  the  green  and  digital  transitions.  Yet,  increasing  the 
pool  of  investible  projects  in  the  euro  area  would  also  require  deeper  integration  of 
goods and services markets, and regulatory simplification.  

(10)  Recent  crises  and  the  required  policy  reaction  resulted  in  increased  levels  of 
government  debt  and  significant  deficits  in  some  euro  area  Member  States.  This 
legacy,  together  with  increasing  ageing-related  costs,  poses  a  challenge  to  fiscal 
sustainability for the coming years. Policymakers will need to create fiscal buffers and 
invest in a fair green and digital transition, social and economic resilience, including 
the European Pillar of Social Rights, energy security, and where necessary, the build-
up of defence capabilities.6 Achieving this balance will require a careful prioritisation 
of  government  expenditures,  and  coordination  of  policies  to  ensure  supporting  the 
investments  needed  to  achieve  sustainable  and  inclusive  economic  growth  and  to 
enhance  resilience.  Prudent  fiscal  policies  will  contribute  to  a  balanced  policy  mix, 
while  financial  stability  will  play  a  key  role  in  reinforcing  the  euro  area’s  economic 
foundations  and  securing  its  position  in  the  global  economy.  The  new  economic 
governance  framework,  and in  particular the use of net  expenditure growth as  single 
operational  indicator  in  the  implementation  of  the  Stability  and  Growth  Pact,  is 
expected to enhance the role of automatic stabilisers in the euro area.  

6  

These efforts will be further informed by the forthcoming EU Preparedness Union Strategy, which will 
provide a framework for a comprehensive, all-hazards approach to anticipate, prevent, and respond to 
diverse risks across the Union. 

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(11)  After peaking in the first quarter of 2021, the average government debt-to-GDP ratio 
for the euro area Member States has been declining, reaching  88.9% of GDP at end-
2023. The aggregate debt ratio is set to rise marginally in 2024-25 (to 89.6% of GDP). 
This  projected  increase  reflects  higher  debt  servicing  costs  in  combination  with  a 
slow-down  in  nominal  GDP  growth  due  to  falling  inflation,  while  high  primary 
deficits continue to weigh on debt dynamics. At the same time, stock-flow adjustments 
are set to turn debt-increasing in 2024-25. Public debt ratios differ across countries: by 
end-2025, most Member States are expected to have a lower debt-to-GDP ratio than in 
2020.  However,  eleven  euro  area  Member  States  would  still  have  debt  ratios  above 
60%,  with  five  remaining  above  100%.  With  debt  for  the  euro  area  still  above  pre-
pandemic levels  and sustainability challenges  prevalent across many  Member States, 
sustained  and  gradual  debt  reduction  strategies  in  line  with  the  new  economic 
governance  framework  are  needed  to  ensure  debt  sustainability  and  to  rebuild  fiscal 
buffers. At the same time incentivising reforms and investments could strengthen GDP 
growth, also contributing to fiscal sustainability. The fiscal stance in the euro area is 
estimated to  have been  contractionary  in  2024  (½  % of GDP) and is  projected to  be 
slightly contractionary in 2025 (just above ¼% of GDP). The proper implementation 
of  the  new  fiscal  framework  would  imply  a  slightly  contractionary  euro  area  fiscal 
stance also in 2026. After the strong expansions of the past years, this is appropriate in 
the  euro  area,  although  there  are  large  differences  among  the  Member  States.  Given 
the  need  to  enhance  fiscal  sustainability  further,  and  to  keep  supporting  the  ongoing 
disinflationary process, prudent policies are necessary. The gradual and differentiated 
fiscal consolidation coupled with reforms and investments, as well as the availability 
of  the  RRF  and  other  Union’s  funds,  is  set  to  protect  economic  growth  and  boost 
potential growth in the euro area. 

(12)  Strengthening public finances is  crucial for addressing future  crises and ensuring the 
sustainability  of  pension,  healthcare,  and  long-term  care  systems.  The  cost  of  age-
related expenditure is forecast to increase, with significant variations across Member 
States,  particularly  driven  by  rising  pension  costs,  as  well  as  long-term  care  and 
healthcare  costs.  The  necessary  adjustment  to  public  finances  poses  challenges, 
highlighting the need to carefully manage revenue and expenditure. In the euro area, 
public  revenue  has  remained,  on  average,  steady  at  around  45.6%  of  GDP  over  the 
past two decades, while expenditure surged during the financial crisis and the COVID-
19 pandemic. The revenue ratio is expected to have increased in 2024, due to windfalls 
from  tax  revenue  and  social  contributions  linked  to  a  strong  labour  market,  and  it  is 
projected to rise further in 2025, driven by discretionary revenue measures. However, 
the current composition of tax revenue may not always be optimal, and the labour tax 
wedge in the euro area is relatively high compared to other advanced economies. This 
is  particularly  relevant  in  the  context  of  the  need  to  maximise  labour  market 
participation in a strong labour market, where labour shortages are a concern. A shift 
in the tax burden from labour taxation to other taxes that may impact growth less and 
are  less  distortive,  such  as  property  taxation  or  environmental  taxes,  would  be 
beneficial.  Targeted  reviews  of  incentives  in  tax  and  benefits  systems  could  help 
alleviate  labour  shortages  while  maintaining  a  stable  revenue  stream,  supporting  the 
necessary adjustment to public finances. Although the total expenditure-to-GDP ratio 
has  decreased  since  2021,  it  remains  elevated  compared  to  pre-COVID  levels.  The 
expenditure ratio is projected to stabilise at around 49.6% of GDP in 2024-25, as the 
restraints  in  primary  current  expenditure  related  to  the  implementation  of  the  new 
Union fiscal framework would be offset by higher interest expenditure. 

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(13)  The  euro  area  financial  system  has  shown  to  be  robust,  in  a  context  of  rapidly 
increasing interest rates, and is now facing an uncertain macroeconomic environment, 
with subdued loan demand and vulnerabilities in the real estate sector of a number of 
Member  States.  In  recent  years,  strong  corporate  profitability  has  helped  firms  to 
service  their  debts  despite  tighter  financing  conditions.  However,  weak  economic 
growth  and  rising  labour  costs  may  increase  vulnerabilities  in  some  sectors.  Most 
notably, commercial real estate prices have fallen sharply, raising concerns over debt 
servicing,  while  residential  price  developments  have  strongly  diverged  among 
Member  States.  The  banking  sector's  resilience  has  been  supported  by  a  robust 
prudential  framework,  including  higher  capital  requirements  and  the  application  of 
borrower-based  measures.  Non-performing  loans  remain  low  but  show  signs  of 
deterioration in the real estate sector. The growing non-bank financial sector also faces 
vulnerabilities where liquidity mismatches are unmitigated and leverage is excessive, 
that might amplify price adjustments in case of abrupt market correction. 

HEREBY RECOMMENDS that euro area Member States take action, individually, including 
through  the  implementation  of  their  Recovery  and  Resilience  Plans,  and  collectively  within 
the Eurogroup, in the period 2025 –2026 to: 

(1) 

Competitiveness 

Foster  productivity  by  moving  resources  towards  high-productivity  and  high 
productivity  potential  sectors,  through  improved  functioning  of  goods  and  services 
markets.  Address  the  fragmentation  of  the  innovation  ecosystems  and  strengthen 
their ability to generate groundbreaking innovations, including in cutting-edge digital 
and clean technologies and infrastructure, and raise the adoption of new digital and 
clean technologies and innovative activities more broadly. Encourage expenditure by 
businesses  on  applied  research  and  innovations  and  the  transition  to  marketable 
products. Pursue policies to encourage the take-up of digital and high-tech solutions 
in  firms.  Enhance  firms’  efficiency  and  ability  to  reach  optimum  scale,  notably  by 
deepening  the  single  market.  Improve  the  business  environment  by  reducing 
administrative  burden  and  regulatory  complexity  and  by  removing  investment 
obstacles.  Ensure  that  industrial  policy  is  effectively  targeted  towards  strategic 
sectors  and  technologies,  ensuring  that  public  support  does  not  distort  the  level 
playing field in the Single Market, and effectively contributes to the competitiveness 
of the euro areaand its open strategic autonomy. Encourage entrepreneurship and the 
creation of new businesses. 

Develop  a  European  Savings  and  Investment  Union,  including  by  deepening  the 
links  between  Capital  Markets  and  Banking  Union  projects,  to  support  growth  and 
investments  and  improve  competitiveness.  Further  develop  the  Banking  Union  by 
making progress on all its elements and finalise the reform of the crisis management 
and deposit insurance framework, with the aim of delivering an ambitious, coherent, 
and  effective  outcome  that  addresses  the  objectives  of  the  review.  Adopt  the 
outstanding  measures  of  the  2020  Capital  Markets  Union  action  plan  and  ensure 
swift  implementation  of  the  already  agreed  measures,  and  advance  work  on  the 
measures  identified  by  the  Eurogroup  towards  a  competitive  and  consistent 
regulatory  and  supervisory  system  for  capital  markets.  Improve  access  to  the 
appropriate funding for businesses to grow and invest, especially innovative SMEs, 
as  well  as  citizens’  access  to  a  larger  choice  of  investment  possibilities  on  capital 
markets. Leverage Union support through financial instruments to improve access to 

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capital  for  SMEs,  notably  for  innovation  and  expansion,  maximising  the  impact  of 
Union  funding.Mobilise  venture  capital  –  particularly  for  start-ups  and  scale-ups  – 
through well-functioning and integrated European capital markets to channel savings 
and risk capital, both from inside and outside the Union. 

Promote  upskilling  and reskilling  of  the  workforce  and  quality  jobs  with  a  view  to 
increase productivity and support a fair green and digital transition. Foster the labour 
market  integration  notably  of  underrepresented  groups,  including  by  enhancing 
active  labour  market  policies  (ALMPs).  Improve  education  and  training  policies, 
including  vocational  education  and  training,  to  improve  educational  outcomes  and 
ensure a better match between demand and supply of skills profiles. 

Promote  tangible  and  intangible  investment  in  critical  technologies,  infrastructure  
and  areas  of  common  priorities,  such  as  the  digital  and  green  transitions,  and  the 
build-up of defence capabilities by mobilising private capital and ensuring necessary 
public  investment.  Stimulate  investment  in  research  and  development  (R&D), 
particularly  by  facilitating  private  sector  spending  through  enhanced  framework 
conditions  for  investment,  structural  reforms  and  by  improving  coordination  of 
public  funding,  including  at  the  Union  level.  Continue  the  swift  implementation  of 
Recovery  and  Resilience  Plans  and  make  full  use  of  cohesion  policy  programmes. 
Enhance the effectiveness of policy action aimed at raising productivity by ensuring 
adequate  identification,  coordination  and  prioritisation  of  measures  including  by 
means  of  improved  governance,  involvement  of  local  and  regional  authorities,  and 
more effective use of National Productivity Boards. 

(2) 

Resilience  

Further increase labour market participation, facilitate the labour market integration 
of underrepresented groups, in particular women, young people, low-skilled as well 
as  persons  with  disabilities,  and  people  with  a  migrant  background.  Remove 
obstacles to the labour force participation including by improving the access to and 
quality of early childhood education and care and long-term care. Take measures to 
facilitate,managed legal migration of third country nationals in shortage occupations, 
in complementarity with fair labour mobility and harnessing labour supply and skills 
from within the Union. 

In  accordance  with  national  practices  and  respecting  the  role  of  social  partners, 
strengthen  the  conditions  that  support  sustainable  wage  and  productivity  growth 
especially for low- and middle-income earners. Wage bargaining should consider the 
competitiveness  dynamics  of  each  Member  State  and  avoid  contributing  to  lasting 
the  effective 
divergences 
involvement of social partners in policymaking and strengthen social dialogue. 

in  competitiveness  within 

the  euro  area.  Ensure 

Strengthen incentives to work by shifting the tax burden away from labour, including 
by  targeted  reforms  of  tax  and  benefit  systems. Take  action  in  fighting  poverty  by 
safeguarding  and  strengthening  sustainable  social  protection  and  inclusion  systems, 
including access to affordable and sustainable housing. 

Develop  and  implement  a  comprehensive  Union-wide  strategy  to  complement  and 
bring together national strategies for effective electrification and the green transition, 
including via a sharp increase in the production of renewable energy and further cuts 
in  the  use  of  imported  fossil  fuels.  In  particular,  sufficient  and  efficient  grid 
interconnections,  notably  cross-border  interconnections,  are  crucial  for  connecting 
producers  and  consumers  across  wide  geographic  areas.  Step  up  efforts  to  improve 

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preparedness for adverse developments, including climate change and nature related 
risks, especially in regions most exposed. 

(3) 

Macro-economic and financial stability  

the  new  fiscal  framework  and 

To  ensure  compliance  with 
improve  debt 
sustainability,  keep  the  national  growth  rates  in  net  expenditure  in  each  Member 
States  as  recommended  by  the  Council.  This  should  deliver  appropriately 
differentiated  fiscal  adjustments  and  an  overall  slightly  contractionary  euro  area 
fiscal stance in 2025 and 2026. 

When  defining  fiscal  strategies,  aim  to  improve  the  quality  and  efficiency  of 
expenditure and revenue measures, aimed at reducing tax avoidance and evasion, and 
to align the strategies with policy objectives, such as redirecting the tax burden from 
labour to less distortive tax bases.  

Monitor risks to macro financial stability related to asset quality, asset repricing and 
strengthen  macroprudential  supervision  of  the  non-bank  financial  intermediation 
sector. 

In  taking  further  steps  in  deepening  the  economic  and  monetary  union  (EMU)  consider  the 
lessons  learnt  from  the  design  and  implementation  of  the  Union’s  comprehensive  economic 
policy response to the COVID-19 crisis. Continue making progress in deepening the EMU in 
full  respect  of  the  Union’s  internal  market  and  in  an  open  and  transparent  manner  towards 
non-euro  area  Member  States.  Continue  strengthening  the  international  role  of  the  euro  and 
make further progress in the work on the digital euro.  

Done at Strasbourg, 

For the Council 
The President 

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