Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of the Netherlands
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Netherlands, budget policy, economic policy, economic recovery, economic reform, employment policy, labour market, research policy, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 4.6.2025  COM(2025) 219 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of the Netherlands {SWD(2025) 219 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic, social, employment, structural and budgetary policies of the 
Netherlands 

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 1466/971, and in particular 
Article 3(3) thereof, 

Having  regard  to  Regulation  (EU)  No 1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16 November 2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

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

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

General considerations 

(1) 

Regulation (EU) 2024/1263, which entered into force on 30 April 2024, specifies the 
objectives  of  the  economic  governance  framework,  which  aims  at  promoting  sound 
and  sustainable  public  finances  and  sustainable  and  inclusive  growth  and  resilience 
through reforms and investments, and preventing excessive government deficits. The 
Regulation  stipulates  that  the  Council  and  the  Commission  conduct  multilateral 
surveillance in the context of the European Semester in accordance with the objectives 
and requirements set out in the TFEU. The European Semester includes, in particular, 
the  formulation,  and  the  surveillance  of  the  implementation  of  country-specific 
recommendations.  The  Regulation  also  promotes  national  ownership  of  fiscal  policy 
and  emphasises  its  medium-term  focus,  combined  with  more  effective  and  coherent 
enforcement. Each Member State must submit to  the Council and the Commission  a 
national  medium-term  fiscal-structural  plan,  containing  its  fiscal,  reform  and 
investment  commitments,  over  4  or  5  years,  depending  on  the  length  of the  national 

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OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj. 
OJ L 306, 23.11.2011, p. 25, ELI: http://data.europa.eu/eli/reg/2011/1176/oj. 

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legislative  term.  The  net  expenditure3  path  in  these  plans  has  to  comply  with  the 
Regulation’s  requirements,  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  the 
Regulation, the adjustment period may be extended by up to three years.  
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council4,  which 
established  the  Recovery  and  Resilience  Facility  (the  ‘RRF’),  entered  into  force  on 
19 February 2021.  The  RRF  provides  financial  support  to  Member  States  for 
implementing  reforms  and  investments,  delivering  a  fiscal  impulse  financed  by  the 
Union.  In  line  with  the  priorities  of  the  European  Semester  for  economic  policy 
coordination, the RRF fosters economic and social recovery while driving sustainable 
reforms and investments, in particular promoting the green and digital transitions and 
making  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 Union and support the continued implementation of the 
European Pillar of Social Rights. 
Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council5  (the 
‘REPowerEU  Regulation’),  which  was  adopted  on  27 February 2023,  aims  to  phase 
out the Union’s dependence on Russian fossil-fuel imports. This helps achieve energy 
security  and  diversify  the  Union’s  energy  supply,  while  increasing  the  uptake  of 
renewables, energy storage capacities and energy efficiency. The Netherlands added a 
REPowerEU chapter to its national recovery and resilience plan in order to finance key 
reforms and investments that will help achieve the REPowerEU objectives. 

On 8 July 2022, the Netherlands submitted its national recovery and resilience plan to 
the  Commission,  in  accordance  with  Article 18(1)  of  Regulation  (EU)  2021/241. 
Pursuant  to  Article 19  of  that  Regulation,  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. On 4 October 2022, the 
Council adopted its Implementing Decision approving the assessment of the recovery 
and  resilience  plan  for  the  Netherlands6,  which  was  amended  under  Article 18(2)  on 
17 October  2023  to  update  the  maximum  financial  contribution  for  non-repayable 

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. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12 February 2021 
establishing 
(OJ  L  57,  18.2.2021,  p. 17,  ELI: 
http://data.europa.eu/eli/reg/2021/241/oj). 
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). 
Council Implementing Decision of  4 October 2022 on the approval of the assessment of the  recovery 
and resilience plan for the Netherlands (ST 12275/22 INIT; ST 12275/22 INIT ADD 1). 

the  Recovery  and  Resilience  Facility 

(2) 

(3) 

(4) 

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(5) 

(6) 

(7) 

financial  support,  as  well  as  to  include  the  REPowerEU  chapter7.  This  Council 
Implementing  Decision was  amended on 17 October 2023 and  again  on 5 November 
20248.  The  last  revision  of  the  Council  Implementing  Decision  was  adopted  on  13 
May 2025. The release of instalments is conditional on the adoption of a decision by 
the  Commission,  in  accordance  with  Article 24(5),  stating  that  the  Netherlands  has 
satisfactorily  achieved  the  relevant  milestones  and  targets  set  out  in  the  Council 
Implementing  Decision.  Satisfactory  achievement  requires  that  the  achievement  of 
preceding  milestones  and  targets  for  the  same  reform  or  investment  has  not  been 
reversed. 

On  21 January  2025  the  Council,  upon  the  recommendation  of  the  Commission, 
adopted  a  recommendation  setting  the  net  expenditure  path  of  the  Netherlands9.  The 
plan  was  submitted  in  accordance  with  Article  11  and  Article 36(1),  point (a),  of 
Regulation (EU)  2024/1263,  covers  the  period  from  2025  until  2028  and  presents  a 
fiscal adjustment spread over four years. 

On  26 November 2024,  the  Commission  adopted  an  opinion  on  the  2025  draft 
budgetary plan of the Netherlands. On the same date, on the basis of Regulation (EU) 
No 1176/2011, the Commission adopted the 2025 Alert Mechanism Report, in which 
it identified the Netherlands as one of the Member States for which an in-depth review 
would  be  needed.  The  Commission  also  adopted  a  recommendation  for  a  Council 
recommendation on the economic policy of the euro area and a proposal for the 2025 
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  area10  on  13  May 
2025 and the Joint Employment Report on 10 March 2025. 

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic framework that aims to boost the EU’s global competitiveness over the next 
five  years.  It  identifies  the  three  transformative  imperatives  of  sustainable  economic 
growth: (i) innovation; (ii) decarbonisation and competitiveness; and (iii) security. To 
close  the  innovation  gap,  the  EU  aims  to  foster  industrial  innovation,  support  the 
growth of start-ups through initiatives like the EU Start-up and Scale-up Strategy, and 
promote the adoption of advanced technologies like artificial intelligence and quantum 
computing.  In  pursuit  of  a  greener  economy,  the  Commission  has  outlined  a 
comprehensive Affordable Energy Action Plan and a Clean Industrial Deal, ensuring 
that  the  shift  to  clean  energy  remains  cost-effective,  competitiveness-friendly, 
particularly  for  energy-intensive  sectors,  and  is  a  driver  for  growth.  To  reduce 
excessive dependencies and increase security, the Union is committed to strengthening 
global  trade  partnerships,  diversifying  supply  chains  and  securing  access  to  critical 
raw materials and clean energy sources. These priorities are underpinned by horizontal 
enablers, namely regulatory simplification, deepening of the single market, financing 
competitiveness and a Savings and Investments Union, promotion of skills and quality 
jobs, and better coordination of EU policies. The Competitiveness Compass is aligned 

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Council Implementing Decision of 17 October 2023 amending the Implementing Decision of 4 October 
2022  on  the  approval  of  the  assessment  of  the  recovery  and  resilience  plan  for  the  Netherlands  (ST 
13613/1/23, 13613/23 REV 1; ST 13613/1/23 ADD1 REV1). 
ST 13789/24 INIT; ST 13789/24 ADD 1 REV 1. 
Council Recommendation of 21 January 2025 setting the net expenditure  path of  the Netherlands, OJ 
C/2025/648, 10.2.2025. 
Council  Recommendation  of  13  May  2025  on  the  economic  policy  of  the  euro  area  (OJ  C, 
C/2025/2782, 22.5.2025, ELI: http:// data.europa.eu/eli/C/2025/2782/oj). 

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(8) 

with  the  European  Semester,  ensuring  that  Member  States’  economic  policies  are 
consistent with the Commission’s strategic objectives, creating a  unified approach to 
economic governance that fosters sustainable growth, innovation and resilience across 
the Union. 

In  2025,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  implementation  of  the  RRF.  The  full  implementation  of  the 
recovery and resilience plans remains essential for delivering on 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.  These  country-specific  recommendations  remain  equally 
relevant  for  the  assessment  of  amended  recovery  and  resilience  plans  in  accordance 
with Article 21 of Regulation (EU) 2021/241. 

(9) 

The  2025  country-specific  recommendations  cover 
the  key  economic  policy 
challenges that are not sufficiently addressed by measures included in the recovery and 
resilience  plans,  taking  into  account  the  relevant  challenges  identified  in  the  2019-
2024 country-specific recommendations.  

(10)  On  4  June  2025,  the  Commission  published  the  2025  country  report  for  the 
Netherlands. It assessed the Netherlands’ progress in addressing the relevant country-
specific  recommendations  and  took  stock  of  the  Netherlands’  implementation  of  the 
recovery and resilience plan. Based on this analysis, the country report identified the 
most pressing challenges  the Netherlands is  facing.  It  also  assessed  the Netherlands’ 
progress  in  implementing  the  European  Pillar  of  Social  Rights  and  in  achieving  the 
Union  headline  targets  on  employment,  skills  and  poverty  reduction,  as  well  as 
progress in achieving the United Nations Sustainable Development Goals. 

(11)  The  Commission  carried  out  an  in-depth  review  under  Article 5  of  Regulation  (EU) 
No 1176/2011 for the Netherlands. The main findings of the Commission’s assessment 
of  macroeconomic  vulnerabilities  for  the  Netherlands  for  the  purposes  of  that 
Regulation  were  published  on  13  May  202511.  On  4  June  2025,  the  Commission 
concluded  that  the  Netherlands  is  experiencing  macroeconomic  imbalances.  In 
particular,  vulnerabilities  related  to  high  private  debt  in  a  context  of  an  overvalued 
housing  market,  and  the  large  current  account  surplus  remain  relevant,  despite  some 
improvements including  greater dynamism of domestic demand; these vulnerabilities 
have cross-border relevance. The current  account surplus is  among  the largest  in  the 
euro area and is expected to remain high. From a savings-investment perspective, all 
sectors of the economy are contributing to the surplus. The corporate sector’s surplus 
is  to  a  significant  degree  driven  by  the  activities  of  the  non-financial  corporations 
abroad  and  the  contribution  of  multinationals’  retained  earnings.  Even  though 
consumption  and  investment  growth  were  key  drivers  of  the  recovery  from  the 
pandemic, the Netherlands is lagging the euro area in terms of the level of corporate 
and public investment. Household debt remains among the highest in the EU but has 
decreased  significantly  due  to  denominator  effects  while  household  borrowing 
recovered strongly  in  2024. House prices have  edged up at  increasing  rates  last year 
and are expected to increase strongly also in 2025 as significant structural challenges 
remain  unaddressed.  Policy  progress  has  been  limited.  Some  measures  have  been 
taken  that  could  decrease  the  current  account  surplus,  but  their  overall  impact  is  not 
expected  to  be  significant.  Some  measures  have  been  taken  to  help  boost  housing 

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SWD(2025) 71 final. 

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supply,  but  there  has  only  been  limited  action  to  decrease  incentives  for  household 
borrowing. The recent introduction of rent limits poses risks to the development of the 
private and social rental markets. 

Assessment of the Annual Progress Report 

(12)  On 21 January 2025 the Council recommended the following maximum growth rates 
of net expenditure for the Netherlands: 3.5% in 2025, 3.3% in 2026, 3.0% in 2027, and 
3.0% in 2028, which correspond to the maximum cumulative growth rates calculated 
by reference to 2023 of 10.4% in 2025, 14.0% in 2026, 17.5% in 2027, and 21.0% in 
2028.  On  29  April  2025  the  Netherlands  submitted  its  Annual  Progress  Report12,  on 
adherence  to  the  recommended  maximum  growth  rates  of  net  expenditure  and  the 
implementation  of  reforms  and  investments  responding  to  the  main  challenges 
identified  in  the  European  Semester  country-specific  recommendations.  The  Annual 
Progress Report also reflects the Netherlands’ biannual reporting on the progress made 
in  achieving  its  recovery  and  resilience  plan  in  accordance  with  Article  27  of 
Regulation (EU) 2021/241. 

(13)  Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  recommended  to 
activate the national  escape clause of the Stability and Growth Pact  in  a coordinated 
manner to support the EU efforts to achieve a rapid and significant increase in defence 
spending and this proposal was welcomed by the European Council of 6 March 2025. 

(14)  Based  on  data  validated  by  Eurostat13,  the  Netherlands’  general  government  deficit 
increased from 0.4% of GDP in 2023 to 0.9% in 2024, while the general government 
debt  fell  from  45.2%  of  GDP  at  the  end  of  2023  to  43.3%  at  the  end  of  2024. 
According to the Commission’s calculations, these developments correspond to a net 
expenditure  growth  rate  of  6.8%  in  2024.  In  the  2025  Annual  Progress  Report,  the 
Netherlands  estimates  the net  expenditure  growth in  2024 at  5.7%. The  Commission 
estimates  that  the  net  expenditure  growth  was  higher  than  in  the  Annual  Progress 
Report.  The  difference  between  the  Commission’s  calculations  and  the  estimates  of 
national  authorities  is  due  to  small  discrepancies  in  the  estimated  impact  of 
discretionary  revenue  measures.  Based  on  the  Commission’s  estimates,  the  fiscal 
stance14,  which  includes  both  nationally  and  EU  financed  expenditure,  was  broadly 
neutral in 2024. 

(15)  According to the Annual Progress Report, the macroeconomic scenario underpinning 
the  budgetary  projections  by  the  Netherlands  expects  real  GDP  growth  at  1.9%  in 
2025 and 1.5% in 2026, while HICP inflation is projected at 3.0% in 2025 and 2.4% in 
2026. The Commission  Spring 2025  Forecast  projects  real  GDP to  grow by 1.3% in 
2025  and  1.2%  in  2026,  and  HICP  inflation  to  stand  at  3.0%  in  2025  and  2.0%  in 
2026.  

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The  2025  Annual  Progress  Reports  are  available  on:  https://economy-finance.ec.europa.eu/economic-
and-fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en.  
Eurostat-Euro Indicators, 22.4.2025. 
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  EU  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 including expenditure financed by non-repayable 
support (grants) from the Recovery and Resilience Facility and other Union funds. 

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(16) 

In the Annual Progress Report, the general government deficit is expected to increase 
to  2.3%  of  GDP  in  2025,  while  the  general  government  debt-to-GDP  ratio  is  set  to 
increase  to  45.0%  by  the  end  of  2025.  These  developments  correspond  to  net 
expenditure growth of 7.9% in 2025. The Commission Spring 2025 Forecast projects a 
general  government  deficit  of  2.1%  of  GDP  in  2025.  The  increase  of  the  deficit  in 
2025  mainly  reflects  personal  income  tax  cuts,  increasing  government  spending  on 
compensation  of  employees  and  intermediate  consumption  due  to  a  higher-than-
expected  base  in  2024  and  a  reduction  of  some  revenue  components  due  to 
anticipation  effects  that  boosted  revenue  in  2024.  According  to  the  Commission’s 
calculations,  these  developments  correspond  to  net  expenditure  growth  of  7.0%  in 
2025. These lower projections of net expenditure growth than in the Annual Progress 
Report  are  due  to  a  higher  level  of  underspending  assumed  in  the  Commission’s 
estimates  as  well  as  small  discrepancies  in  the  impact  of  discretionary  revenue 
measures. Based on the Commission’s estimates, the fiscal stance, which includes both 
nationally and EU financed expenditure, is projected to be expansionary, by 0.6% of 
GDP, in 2025. The general government debt-to-GDP ratio is set to increase to 45.0% 
by the end of 2025. The increase of the debt-to-GDP ratio in 2025 mainly reflects the 
budget deficit as well as stock-flow adjustments. 

(17)  General  government  expenditure  amounting  to  0.1%  of  GDP  is  expected  to  be 
financed  by  non-repayable  support  (“grants”)  from  the  Recovery  and  Resilience 
Facility  in  2025,  compared  to  0.1%  of  GDP  in  2024,  according  to  the  Commission 
Spring 2025 Forecast. Expenditure financed by Recovery and Resilience Facility non-
repayable support enables high-quality investment and productivity-enhancing reforms 
without  a  direct  impact  on  the  general  government  balance  and  debt  of  the 
Netherlands. 

(18)  General government defence expenditure in the Netherlands  remained stable at 1.3% 
of  GDP  between  2021  and  202315.  According  to  the  Commission  Spring  2025 
Forecast, expenditure on defence is projected at 1.5% of GDP in both 2024 and 2025. 
This corresponds to an increase of 0.2 percentage points of GDP compared to 2021.  

(19)  According  to  the  Commission  Spring  2025  Forecast,  net  expenditure  in  the 
Netherlands  is  projected  to  grow  by  7.0%  in  2025  and  14.3%  cumulatively  in  2024 
and 2025. Based on the Commission Spring 2025 Forecast, the net expenditure growth 
of  the  Netherlands  in  2025  is  projected  to  be  above  the  recommended  maximum 
growth  rate,  corresponding  to  a  deviation16  of  1.4%  of  GDP  in  annual  terms.  When 
considering 2024 and 2025 together, the cumulative growth rate of net expenditure is 
also projected to be above the recommended maximum growth rate, corresponding to 
a  deviation  of  1.4%  of  GDP.  The  projected  deviations  exceed  the  0.3%  of  GDP 
threshold for the annual deviation and the 0.6% of GDP threshold for the cumulative 
deviation.  Overall,  this  means  there  is  a  risk  of  deviation  from  the  recommended 
maximum net expenditure growth, when outturn data for 2025 will be available next 
spring. 

(20) 

In the Annual Progress Report, the general government deficit is projected to increase 
to 2.8% of GDP in 2026, while the general government debt-to-GDP ratio is projected 
to increase to 47.8% by the end of 2026. After 2026, in the Annual Progress Report, 

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Eurostat, government expenditure by classification of functions of government (COFOG).  
From  2026  these  figures  will  appear  in  the  control  account  that  is  established  in  Article  22  of  the 
Regulation (EU) 2024/1263. 

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the general  government  deficit is  projected to  decrease to  2.0% of GDP in 2027 and 
2.2% 2028. In turn, after 2026, the general government debt-to-GDP ratio is projected 
to increase to 48.5% in 2027 and 49.2% in 2028. Based on policy measures known at 
the  cut-off  date  of  the  forecast,  the  Commission  Spring  2025  Forecast  projects  a 
general  government  deficit  of  2.7%  of  GDP  in  2026.  The  increase  of  the  deficit  in 
2026 mainly reflects a reform of the military pension system which requires a lump-
sum transfer of the government to a pension fund that is outside of government control 
with  a  budgetary  impact  of  0.7%  of  GDP,  which  is  recorded  as  a  one-off  measure. 
Without this transaction, the government balance would improve moderately as VAT 
rates on certain goods and services are increased, and personal income tax brackets are 
not  fully  adjusted  to  inflation.  These  developments  correspond  to  net  expenditure 
growth  of  3.8%  in  2026.  Based  on  the  Commission’s  estimates,  the  fiscal  stance, 
which  includes  both  nationally  and  EU  financed  expenditure,  is  projected  to  be 
broadly neutral in 2026. The general government debt-to-GDP ratio is projected by the 
Commission to increase to 47.8% by the end of 2026. The increase of the debt-to-GDP 
ratio in 2026 mainly reflects the budget deficit as well as stock-flow adjustments. 

Key policy challenges 

(21)  The Dutch system of private income taxation treats certain assets differently from the 
rest,  affecting  the  allocation  of  capital  and  distorting  economic  decisions.  Housing 
wealth and pension contributions are given preferential treatment, boosting demand in 
the  owner-occupied  housing  market  and  lowering  disposable  incomes  of  households 
due  to  high  pension  contributions.  In  addition,  holding  assets  in  closely  held 
companies  (a  company  in  which  the  majority  of  its  shares  are  owned  by  only  a  few 
individuals)  allows  taxpayers  to  delay  tax  payments  on  such  returns,  while  still 
benefiting from those returns through tax-free loans from the company. Furthermore, 
households with financial market assets are taxed at assumed rates of return, which is 
unfavourable  when  the  actual  return  is  lower.  As  a  result,  household  wealth  in  the 
Netherlands  is  highly  concentrated  in  illiquid  types  of  wealth,  such  as  housing  or 
pensions.  This  exposes households to  greater  economic risk during economic shocks 
and in many cases may not lead to an optimal consumption pattern over their lifetime 
as  disposable  incomes  are  squeezed  by  high  pension  contributions  and  mortgage 
payments during working age. The unequal tax treatment within and across asset types 
gives rise to tax arbitrage, reduces the ability of the tax system to act as an automatic 
stabiliser,  exacerbates  economic  inequalities  and  can  skew  the  efficient  allocation  of 
capital. As a result, this unequal treatment is also relevant when it comes to addressing 
macroeconomic imbalances. 

(22) 

In addition to the tax incentives mentioned above, overvaluation in the housing market 
has been fuelled by a shortage of new dwellings.  The government could  advance  its 
plans  to  increase  housing  supply  by  means  of  comprehensively  removing  obstacles 
that are currently holding back residential construction, and, in particular, simplifying 
planning  and  permitting  processes  that  on  average  take  up  to  6-7  years  to  complete, 
out  of  a  total  construction  period  of  10  years.  This  would  help  mitigate 
macroeconomic imbalances. 

(23)  The  underdeveloped  private  rental  market,  characterised  by  high  costs  and  limited 
options for tenants, poses significant challenges as regards affordability and increases 
poverty  risks  for  low-  and  middle-income  households.  Recent  policy  developments, 
including  the  extension  of  rent  price  controls,  bans  on  buy-to-let  properties,  and 
changes  to  the  tax  treatment  of  rental  properties,  have  exacerbated  existing  supply 
shortages in the private rental sector. The scarcity of affordable rental housing hinders 

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labour  mobility  and  competitiveness.  To  address  this  issue,  rebalancing  incentives 
between  homeownership  and  renting,  and  making  investments  more  attractive  by 
allowing market forces to operate to a greater degree in the sector, could help expand 
the  private  rental  market.  This,  in  turn,  would  help  mitigate  macroeconomic 
imbalances. 

(24)  The  Dutch  long-term  care  system  faces  significant  challenges  from  an  ageing 
population,  costly  institutional  care  and  generous  coverage  of  dependents.  The 
Netherlands  fares  well  compared  to  most  Member  States  in  terms  of  adequacy, 
availability,  and  quality  of  the  long-term  care  system  as  well  as  the  size  of  the 
workforce  in  the  field.  However,  the  system  is  increasingly  putting  pressure  on  the 
government budget. In 2022, total long-term care spending in the Netherlands stood at 
3.8%  of  GDP,  the  highest  value  in  the  EU  by  a  wide  margin.  Furthermore,  the 
Commission’s 2024 Ageing Report expects the increase in long-term care spending by 
2070 in the Netherlands  to be one of the largest in the EU.  Measures to  address this 
could include aligning co-payments, i.e. own contributions by patients, to the cost of 
the care they receive across different types of benefits. The system would work more 
efficiently if patients determined their choice of care setting based on their individual 
care needs, instead of choosing a setting that minimises their co-payments. Additional 
investments  in  prevention  to  delay  the  onset  of  long-term  care  needs  and  further 
improving the delivery of community-based care could also help reduce costs. These 
improvements  could  ensure  that  the  benefits  of  the  system  are  allocated  more 
efficiently without compromising the high coverage and quality of the system. 

(25) 

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.  These  are  expected  to  help  effectively  address  all  or  a  significant  subset  of 
challenges  identified  in  the  relevant  country-specific  recommendations.  Within  this 
tight timeframe, finalising the effective implementation of the recovery and resilience 
plan,  including  the  REPowerEU  chapter,  is  essential  to  boost  the  Netherlands’  long-
term  competitiveness  through  the  green  and  digital  transitions,  while  ensuring  social 
fairness. 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. 

(26)  The implementation  of  cohesion  policy programmes, which encompass support from 
the  European  Regional  Development  Fund  (ERDF),  the  Just  Transition  Fund  (JTF) 
and  the  European  Social  Fund  Plus  (ESF+),  has  accelerated  in  the  Netherlands.  It  is 
important to continue efforts to ensure the swift implementation of these programmes, 
while maximising their impact on the ground. The Netherlands is already taking action 
under  its  cohesion  policy  programmes  to  boost  competitiveness  and  growth.  At  the 
same time, the Netherlands continues to face challenges, and there could be scope to 
further  boost  competitiveness,  including  by  up-  and  reskilling  of  vulnerable  groups 
and developing and manufacturing critical technologies. In accordance with Article 18 
of Regulation (EU) 2021/1060, the Netherlands is required – as part of the mid-term 
review of the cohesion policy funds – to review each programme taking into account, 
the  2024  country-specific 
among  other 

the  challenges 

identified 

things, 

in 

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recommendations.  The  Commission  proposals  adopted  on  1  April  202517  extend  the 
deadline for submitting an assessment – for each programme – of the outcome of the 
mid-term review beyond 31 March 2025. It also provides flexibilities to help speed up 
programme  implementation  and  incentives  for  Member  States  to  allocate  cohesion 
policy resources to five strategic priority areas of the Union, namely competitiveness 
in strategic technologies, defence, housing, water resilience and energy transition. 

(27)  The  Strategic  Technologies  for  Europe  Platform  (STEP)  provides  the  opportunity  to 
invest in a key EU strategic priority by strengthening the EU’s competitiveness. STEP 
is channelled through 11 existing EU funds. Member States can also contribute to the 
InvestEU programme supporting investments in priority areas. The Netherlands could 
use  these  initiatives  to  support  the  development  or  manufacturing  of  critical 
technologies, including clean and resource-efficient technologies. 

(28)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan  and  other  EU  funds,  the  Netherlands  faces  several  additional  challenges  related 
to: i) R&D investments, ii) access to finance, iii) reliance on fossil fuels, iv) electricity 
congestion,  v)  excessive  nitrogen  deposits,  vi) labour  and  skills  shortages,  vii) basic 
skills,  and  viii) participation  in  science,  technology,  engineering,  and  mathematics 
(STEM) programmes. 

(29)  The Netherlands has a well-performing research and innovation system, ranking fourth 
in the Summary Innovation index. However, recent trends indicate public and private 
R&D intensity has fallen below the EU average and globally, which can hinder long-
term competitiveness. In particular, sectors such as manufacturing and information and 
communications technologies (ICT) face significant investment gaps, with investment 
as  a  share  of  value  added  being  lower  than  in  the  euro  area.  R&D  investment  as  a 
share of gross value added in the private sector lags behind other European innovation 
leaders. At the same time, public R&D investment is falling below the EU average and 
the  recent  budget  cuts  to  the  National  Growth  Fund  have  further  reduced  public 
support  to  innovation.  To  address  these  challenges,  a  targeted  approach  is  needed, 
focusing  on  key  competitive  areas,  investing  in  research  and  testing  facilities,  and 
promoting  priority  technologies  outlined  in  the  National  Technology  Strategy, 
including  quantum 
technology,  semiconductors,  AI,  and  data  science.  By 
strengthening public support for innovation, the Netherlands can boost the innovation 
landscape and maintain its position as a European innovation leader. 

(30)  Despite  having  well-capitalised  financial  markets  that  provide  a  stable  source  of 
funding to the economy, as well as one of the deepest venture capital markets in the 
EU, some start-ups and scale-ups face difficulties in accessing funding. In particular, 
there is a funding gap for start-ups with capital needs above EUR 10 million and scale-
ups  seeking  funding  above  EUR 50  million  before  large-scale  commercialisation. 
They rely heavily on foreign investors. The Dutch government has announced several 
initiatives  to  facilitate  scale-up  investments  through  Invest-NL  and  Dutch  Venture 
Initiative, but these initiatives need to be implemented and monitored effectively. The 
current 
long-term 
competitiveness, as start-ups and scale-ups show higher productivity growth than other 
new  businesses.  To  address  this  issue,  the  Netherlands  can  benefit  from  using 

funding  gap  could  hinder 

investment  and 

innovative 

17 

Proposal  for  a  REGULATION  OF  THE  EUROPEAN  PARLIAMENT  AND  OF  THE  COUNCIL 
amending  Regulations  (EU)  2021/1058  and  (EU)  2021/1056  as  regards  specific  measures  to  address 
strategic challenges in the context of the mid-term review - COM(2025) 123 final. 

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financing  tools  and  schemes  such  as  guarantees,  or  fund-to-fund  instruments  to 
channel funding resources and attract institutional investors such as domestic pension 
funds, which are the largest in the euro area. 

(31)  The  Netherlands  still  relies  heavily  on  fossil  fuels.  In  2023,  oil  and  natural  gas 
accounted  for  43.9%  and  33.8%,  respectively,  of  the  country’s  overall  energy  mix, 
while  the  share  of  renewables  amounted  to  only  13.8%.  This  makes  the  Dutch 
economy vulnerable to global price developments and hinders the transition to a green 
economy. Despite the Netherlands advancing the roll-out of renewable energy sources, 
particularly  offshore  wind,  its  renewable  energy  share  is  still  below  the  EU  average 
and below EU targets.  Additional efforts are therefore needed for the Netherlands to 
ensure  further  roll-out  of  renewables  and  to  achieve  the  EU  2030  renewable  energy 
targets.  This  could  include  measures  to  reduce  financial  risks  in  the  offshore  wind 
sector to maintain the attractiveness of investments in the sector. 

(32)  The  congestion  of  the  electricity  grid  has  worsened,  affecting  both  rural  and  urban 
areas,  and  both  the  transmission  and  distribution  networks.  This  hinders  the  clean 
energy  transition,  constrains  economic  activity,  and  undermines  the  Netherlands’ 
competitiveness.  Network  operators  are  frequently  forced  to  refuse  grid  access 
requests  from  new  electricity  producers  and  consumers.  Whereas  grid  congestion  is 
being  addressed  through  a  combination  of  investments  in  grid  and  regulatory 
initiatives, it is expected that grid congestion will continue being a major challenge in 
the  short  to  medium  term,  therefore  requiring  continued  attention  and  action.  The 
Netherlands  could  benefit  from  increasing  the  capacity  of  its  transmission  and 
distribution  grid,  implementing  flexibility  solutions  and  reducing  the  level  of  loop 
flows in a structural manner to maximise cross-zonal electricity trading over existing 
cross-border infrastructure. 

(33)  Excessive levels of nitrogen deposition, resulting mainly, but not exclusively, from the 
intensive  agricultural  sector,  remains  a  significant  environmental  challenge  that 
impacts the Netherlands’ economy at large. Excessive nitrogen deposition leads to the 
over-fertilisation  and  acidification  of  soil  and  water  bodies,  while  at  the  same  time 
putting  significant  constrains  on  the  permitting  of  construction  activities,  delaying 
needed  infrastructure  and  impacting  the  country’s  competitiveness.  Surface  and 
ground  water  quality  also  remains  a  concern,  with  many  water  bodies  failing  to 
comply  with  the  Water  Framework  Directive  and  the  Nitrates  Directive.  Therefore, 
additional  measures  are  needed  to  structurally  address  excessive  nitrogen  deposition 
by  the  emitting  sectors  and  to  drive  a  transition  to  sustainable  agriculture,  including 
organic  farming.  In  particular,  the  Netherlands  could  benefit  from  adopting  farming 
practices that aim to cut nutrient and pesticide pollution and greenhouse gas emissions. 

(34)  The share of Dutch workers with flexible or temporary contracts is nearly double the 
EU average. In addition, there are various incentives in the Dutch labour market that 
create an unequal playing field between employees and self-employed persons without 
employees, enabling bogus self-employment and resulting in a relatively high share of 
self-employed in the Dutch labour market. The widespread use of flexible employment 
has contributed to labour market segmentation (i.e. the division of the jobs market into 
different  categories  of  workers  with  different  levels  of  job  security  and/or  access  to 
social  and  other  benefits)  and  disproportionately  affects  vulnerable  groups  such  as 
workers  with  lower  levels  of  skills  and  people  with  a  migrant  background.  These 
workers  are  more  likely  to  be  trapped  in  precarious  jobs  with  limited  access  to 
training, inadequate social protection, and a higher risk of in-work poverty and social 
exclusion.  The  high  prevalence  of  self-employed  and  flexible  employment  can  also 

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influence  productivity  growth,  as  these  forms  of  employment  often  have  fewer 
opportunities for learning, development and training. The government is implementing 
a  package  of  measures  to  reduce  incentives  for  self-employment  and  flexible 
employment.  This  includes:  i)  various  legislative  changes  to  limit  bogus  self-
employment  and  reduce  the  differences  between  the  self-employed  and  employees, 
which are all covered by the Dutch recovery and resilience plan; and ii) a bill that aims 
to  provide  job  security  for  those  working  under  flexible  employment  contracts. 
Implementing these plans in a comprehensive and speedy manner is crucial to address 
these persistent issues in the Dutch labour market. 

(35)  Labour  and  skills  shortages  remain  a  significant  challenge  in  the  Netherlands, 
affecting a wide range of sectors including healthcare, education, technology and ICT. 
The  Netherlands  also  stands  out  in  this  regard  compared  to  peers,  with  Dutch 
companies  significantly  more  likely  to  report  hiring  difficulties  compared  to  the  EU 
average.  There  are  several  structural  factors  affecting  labour  shortages,  including 
demographic  trends,  slow  workforce  growth  and  the  low  average  number  of  hours 
worked.  These  constraints  are  hampering  productivity  and  competitiveness.  Despite 
high  participation  rates,  the  Netherlands  has  an  untapped  labour  potential,  especially 
among people with a migrant background and part-time workers, particularly women. 
To increase labour supply, people could be encouraged to work more hours, including 
through  policy  measures  that  enables  them  to  combine  work  with  family  and  care 
responsibilities  and  by  promoting  quality  of  work  and  better  working  conditions. 
Attracting  talent  can  also  increase  labour  supply.  Addressing  labour  shortages  will 
require  a  multifaceted  approach  that  targets  sector-specific  barriers,  and  boosts 
productivity-enhancing 
reskilling 
opportunities,  particularly  for  people  at  the  margins  of  the  labour  market,  will  be 
essential  to  alleviate  shortages,  encourage  sectoral  mobility,  and  support  long-term 
economic  resilience.  Policy  measures  on  the  demand  side  could  focus  on  promoting 
high  value-added  sectors  as  well  as  sectors  related  to  societal  challenges,  such  as 
education  and  healthcare,  encouraging  cross-sector  mobility  and 
increasing 
productivity-enhancing and R&D investments. 

investments.  Strengthening  upskilling  and 

(36)  The  decline  in  basic  skills  in  the  Netherlands  is  one  of  the  largest  in  the  EU  and 
undermines education and labour market outcomes and competitiveness. Although the 
Netherlands still has a relatively high share of top performing students, the number of 
underachievers has sharply increased in mathematics, science and reading over the last 
decade. Underachievement is four times more common among disadvantaged students 
than  among  their  peers.  Teacher  shortages  are  considerable  and  can  impact  student 
learning outcomes  and hinder access to quality education for all, as they vary by the 
share  of  disadvantaged  pupils  in  the  schools  and  between  regions.  To  address  these 
issues, the Netherlands could evaluate and review existing measures to improve basic 
skills,  such  as  the  ‘Master  plan  for  basic  skills’  launched  in  2022,  and  consider 
measures to improve student learning outcomes, such as making it easier to transition 
between different educational tracks, focusing on schools with a disadvantaged student 
population. 

(37)  The Netherlands faces a challenge in  ensuring sufficient  post-secondary  graduates in 
STEM  fields,  exacerbating  skills  shortages.  Despite  having  a  tertiary  attainment  rate 
above  the  EU  average,  the  country  lags  behind  in  the  share  of  STEM  graduates.  In 
particular, women and students with a migration background are underrepresented in 
STEM  fields.  To  address  this  issue,  targeted  education  support  can  be  provided, 
including  personalised guidance  and tailored  teaching  processes. Such initiatives can 

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(38) 

(39) 

help  break  down  barriers  and  encourage  underrepresented  groups  specifically  to 
pursue STEM studies.  

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  2025,  the  Council  recommended  that  the  euro-area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the  2025 
Recommendation  on  the  economic  policy  of  the  euro  area.  For  the  Netherlands, 
recommendations (2), (3), and (5) help implement the first euro-area recommendation 
on  competitiveness,  while  recommendations  (1),  (4)  and  (5)  help  implement  the 
second  euro-area  recommendation  on  resilience,  and  recommendation  (1)  helps 
implement  the  third  euro-area  recommendation  on  macroeconomic  and  financial 
stability set out in the 2025 Recommendation. 

In light of the Commission’s in-depth review and its conclusions on the existence of 
imbalances,  recommendations  under  Article 6  of  Regulation  (EU)  No 1176/2011  are 
reflected  in  recommendation  (1).  Policies  referred  to  in  recommendation  (1)  help  to 
address  vulnerabilities  linked  to  high  private  debt  in  a  context  of  an  overvalued 
housing  market  and  vulnerabilities  linked  to  the  high  current  account  surplus. 
Recommendation (1) contributes to both addressing imbalances and implementing the 
Recommendation on the economic policy of the euro area, in line with recital 38. 

HEREBY RECOMMENDS that the Netherlands take action in 2025 and 2026 to: 

1. 

2. 

3. 

4. 

Reinforce overall defence spending and readiness in line with the European Council 
conclusions  of  6  March  2025.  Ensure  that  net  expenditure  respects  the  path 
recommended  by  the  Council  on  21  January  2025.  Align  the  taxation  of  different 
types  of  income  from  wealth,  among  others  to  reduce  incentives  for  debt-financed 
homeownership.  Remove  obstacles  for  the  construction  of  new  dwellings  by 
simplifying  planning  and  permitting  procedures.  Support  the  development  of  an 
affordable private rental sector, including by making investments in the sector more 
attractive. Address the expected increase in age-related expenditure in long-term care 
by  making  the  system  more  cost-effective,  including  by  allocating  benefits  more 
efficiently. 

In  view  of  the  applicable  deadlines  for  the  timely  completion  of  reforms  and 
investments under Regulation (EU) 2021/241, ensure the effective implementation of 
the recovery and resilience plan, including the REPowerEU chapter.  Accelerate the 
implementation of cohesion policy programmes (ERDF, JTF, ESF+), building, where 
appropriate, on the opportunities offered by the mid-term review. Make optimal use 
of EU instruments, including the scope  provided by the InvestEU and the Strategic 
Technologies for Europe Platform, to improve competitiveness.  

Enhance public and private R&D intensity by targeting support to investments in key 
strategic technologies. Address the funding gap for late-stage start-ups and scale-ups 
by  leveraging  available  financing  tools  and  providing  incentives  to  attract 
institutional investors. 

Reduce overall reliance on fossil fuels by accelerating the roll-out of renewables and 
improving  energy  efficiency,  particularly  in  buildings.  Decrease  electricity  grid 
congestion  by  increasing  the  capacity  of  the  transmission  and  distribution  grid, 
implementing  flexibility  solutions,  maximising  cross-zonal  trade,  and  further 
simplifying  permitting  procedures.  Implement  structural  measures  to  address 

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5. 

excessive  nitrogen  deposition  and  the  deterioration  of  water  quality  effectively, 
especially by making further efforts for sustainable agriculture. 

Adopt  and  implement  measures  to  reduce  incentives  to  use  flexible  or  temporary 
contracts. Implement comprehensive measures to address labour and skills shortages, 
including by tapping into underused labour potential, by strengthening upskilling and 
reskilling  opportunities  for  all  through  targeted  and  tailored  active  labour  market 
policies, and by encouraging mobility to high-productivity sectors and sectors related 
to  societal  challenges.  Improve  basic  skills,  including  by  addressing  teacher 
shortages  and  tailored  support  to  disadvantaged  schools,  and  boost  participation  in 
STEM programmes by targeted educational support and career advice, especially for 
women and students with a migrant background. 

Done at Brussels, 

For the Council 
The President 

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