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

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.6.2025  COM(2025) 207 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Ireland {SWD(2025) 207 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

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

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 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 
legislative  term.  The  net  expenditure2  path  in  these  plans  has  to  comply  with  the 

1 
2 

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

EN 

1 

  EN 

 
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  Council3,  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  Council4  (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.  Ireland  added  a  new 
REPowerEU chapter to its national recovery and resilience plan in order to finance key 
reforms and investments that will help achieve the REPowerEU objectives. 

On  28 May  2021,  Ireland  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 8 September 2021, the Council adopted 
its  Implementing  Decision  approving  the  assessment  of  the  recovery  and  resilience 
plan  for  Ireland5,  which  was  amended  under  Article 18(2)  on  8 December  2023  to 
update  the  maximum  financial  contribution  for  non-repayable  financial  support6,  as 
well  as  on  21 June  2024  to  include  the  REPowerEU  chapter7.  The  release  of 
instalments  is  conditional  on  the  adoption  of  a  decision  by  the  Commission,  in 
accordance  with  Article 24(5),  stating  that  Ireland  has  satisfactorily  achieved  the 

the  Recovery  and  Resilience  Facility 

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 8 September 2021 on the approval of the assessment of the recovery 
and resilience plan for Ireland (11046/2021). 
Council  Implementing  Decision  of  8 December  2023  amending  the  Implementing  Decision  of 
8 September  2021  on  the  approval  of  the  assessment  of  the  recovery  and  resilience  plan  for  Ireland 
(15965/2023). 
Council Implementing Decision of 21 June 2024 amending the Implementing Decision of 8 September 
2021 on the approval of the assessment of the recovery and resilience plan for Ireland (10262/2024). 

(2) 

(3) 

(4) 

3 

4 

5 

6 

7 

EN 

2 

  EN 

 
(5) 

(6) 

(7) 

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 endorsing the national medium-term fiscal-structural plan 
of Ireland8. 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 2029 and 
sets a budgetary constraint in the form of a maximum net expenditure growth rate over 
four years. 

On  26 November 2024,  the  Commission  adopted  an  opinion  on  the  2025  draft 
budgetary  plan  of  Ireland.  On  the  same  date,  on  the  basis  of  Regulation  (EU) 
No 1176/2011, the Commission adopted the 2025 Alert Mechanism Report, in which 
it did not identify Ireland 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  area9  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 
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. 

(8) 

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 

8 

9 

Council  Recommendation  of  21 January  2025  endorsing  the  medium-term  fiscal-structural  plan  of 
Ireland, OJ C/2025/667, 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). 

EN 

3 

  EN 

 
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. 

in 

Ireland’s  progress 

(10)  On  4 June  2025,  the  Commission  published  the  2025  country  report  for  Ireland.  It 
assessed 
country-specific 
recommendations  and  took  stock  of  Ireland’s  implementation  of  the  recovery  and 
resilience plan. Based on this analysis, the country report identified the most pressing 
challenges  Ireland  is  facing.  It  also  assessed  Ireland’s  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. 

addressing 

relevant 

the 

Assessment of the Annual Progress Report 

(11)  On 21 January 2025 the Council recommended the following maximum growth rates 
of  net  expenditure  for  Ireland:  5.1%  in  2025,  6.5%  in  2026,  4.9%  in  2027,  5.4%  in 
2028 and 4.7% in  2029, which correspond to  the  maximum  cumulative growth  rates 
calculated  by  reference  to  2023  of  15.4%  in  2025,  22.8%  in  2026,  28.9%  in  2027, 
35.8%  in  2028  and  42.3%  in  2029.  On  6  May  2025,  Ireland  submitted  its  Annual 
Progress  Report10,  on  adherence  to  the  recommended  maximum  growth  rates  of  net 
expenditure  and  the  implementation  of  reforms  and  investments  responding  to  the 
country-specific 
main 
recommendations.  The  Annual  Progress  Report  also  reflects  Ireland’s  biannual 
reporting  on  the  progress  made  in  achieving  its  recovery  and  resilience  plan  in 
accordance with Article 27 of Regulation (EU) 2021/241. 

the  European  Semester 

challenges 

identified 

in 

(12)  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  (NEC)  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.  

(13)  Based on data validated by Eurostat 11, Ireland’s general government surplus increased 
from a surplus of 1.5% of GDP in 2023 to a surplus of 4.3% in 2024, while the general 
government debt fell from  43.3% of GDP at the end of 2023 to  40.9% at the end of 
2024. According to the Commission’s calculations, these developments correspond to 
a net expenditure growth rate of 8.2% in 2024. In the Annual Progress Report, Ireland 
estimates  the  net  expenditure  growth  in  2024  at  8.0%.  Based  on  the  Commission’s 

10 

11 

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. 

EN 

4 

  EN 

 
estimates,  the  fiscal  stance12,  which  includes  both  nationally  and  EU  financed 
expenditure, was broadly neutral in 2024. 

(14)  According to the Annual Progress Report, the macroeconomic scenario underpinning 
the  budgetary  projections  by  Ireland  expects  real  GDP  growth  at  4.1%  in  2025  and 
3.4% in 2026, while HICP inflation is projected at 2.1% in both 2025 and 2026. The 
Commission  Spring  2025  Forecast  projects  real  GDP  to  grow  by  3.4%  in  2025  and 
2.5% in 2026, and HICP inflation to stand at 1.6% in 2025 and 1.4% in 2026. 

(15) 

In the Annual Progress Report, the general government surplus is expected to decrease 
to  1.5%  of  GDP  in  2025,  while  the  general  government  debt-to-GDP  ratio  is  set  to 
decrease  to  37.7%  by  the  end  of  2025.  These  developments  correspond  to  net 
expenditure growth of 5.3% in 2025. The Commission Spring 2025 Forecast projects a 
general government surplus of 0.7% of GDP in 2025.  The decrease of the surplus in 
2025  mainly  reflects  a  slowdown  in  revenue  growth  amid  heightened  levels  of 
consumer and business uncertainty, as well as the absence of the high one-off revenue 
seen  in  2024.  According  to  the  Commission’s  calculations,  these  developments 
correspond to net expenditure growth of 6.7% in 2025. These higher projections of net 
expenditure  growth  than  in  the  Annual  Progress  Report  are  due  to  stronger  current 
expenditure growth estimated by the Commission, including diverging assumptions on 
the  permanent  impact  beyond  2024  of  the  ‘cost  of  living’  package  announced  in 
Budget 2025. The difference between the general government balance projected by the 
Commission  and  Ireland  is  due  to  differences  in  the  underlying  macroeconomic 
assumptions,  as  well  as  stronger  current  expenditure  growth  estimated  by  the 
Commission. Based on the Commission’s estimates, the fiscal stance, which includes 
both nationally and EU financed expenditure, is  projected to be neutral in 2025. The 
general government debt-to-GDP ratio is projected by the Commission to decrease to 
38.6%  by  the  end  of  2025.  The  decrease  of  the  debt-to-GDP  ratio  in  2025  mainly 
reflects  the  projected  government  surplus  and  the  favourable  interest  rate-growth 
differential, corrected for significant stock flow adjustments. 

(16)  General government expenditure amounting to less than 0.1% of GDP is expected to 
be  financed  by  non-repayable  support  (“grants”)  from  the  Recovery  and  Resilience 
Facility  in  2025,  compared  to  less  than  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 Ireland. 

(17)  General government defence expenditure in  Ireland remained stable at 0.2% of GDP 
between  2021  and  2023  13.  According  to  the  Commission  Spring  2025  Forecast, 
expenditure on defence is projected to remain stable at 0.2% of GDP in both 2024 and 
2025. This corresponds to no change compared to 2021. 

(18)  According  to  the  Commission  Spring  2025  Forecast,  net  expenditure  in  Ireland  is 
projected to grow by 6.7% in 2025 and 15.5% cumulatively in 2024 and 2025. Based 

12 

13 

The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of 
the  general  government.  It  aims  to  assess  the  economic  impulse  stemming  from  fiscal  policies,  both 
those  that  are  nationally  financed  and  those  that  are  financed  by  the  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. 
Eurostat, government expenditure by classification of functions of government (COFOG).  

EN 

5 

  EN 

 
(19) 

(20) 

on  the  Commission  Spring  2025  Forecast,  the  net  expenditure  growth  of  Ireland  in 
2025 is projected to be above the recommended maximum growth rate, corresponding 
to  a  deviation14  of  0.3%  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  less  than 
0.1% of GDP. The projected deviation slightly exceeds the 0.3% of GDP threshold for 
the  annual  deviation  but  does  not  exceed  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. 

In  the  Annual  Progress  Report,  the  general  government  surplus  is  projected  to 
decrease to 1.0% of GDP in 2026, while the general government debt-to-GDP ratio is 
projected to decrease to 35.9% by the end of 2026. Based on policy measures known 
at  the  cut-off  date  of  the  forecast,  the  Commission  Spring  2025  Forecast  projects  a 
general government surplus of 0.1% of GDP in 2026.  The decrease of the surplus in 
2026 mainly reflects the assumption of modest revenue growth and continued strong 
growth  in  expenditure.  These developments  correspond to  net  expenditure growth  of 
6.2% 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 
decrease to 38.2% by the end of 2026. The decrease of the debt-to-GDP ratio in 2026 
mainly  reflects 
interest  rate-growth  differential,  corrected  for 
the  favourable 
significant stock flow adjustments. 

Key policy challenges 

Ireland’s public finances are subject to significant risks due to its tax revenues being 
highly  concentrated  on  relatively  few  foreign-owned  multinational  companies. 
Corporate  tax  receipts,  which  have  more  than  doubled  since  2019  and  amounted  to 
EUR 28.1 billion (19% of government revenue) in 2024, are particularly  exposed.  In 
2023, over half of these receipts were paid by just 10 large companies. Moreover, the 
authorities  estimate  that  half  of  corporate  tax  revenues  are  ‘windfall’  and  highly 
uncertain in nature. As a result, international developments such as changes in the US 
trade and tax policy or the global tax environment could have a significant impact on 
the stability of Ireland’s revenue. The establishment of the Future Ireland Fund and the 
Infrastructure, Climate and Nature Fund serves to channel windfall revenue to longer-
term  spending  objectives.  Ireland  would  benefit  from  increasing  the  resilience  of  its 
public finances by diversifying its revenue sources. To this end, Ireland could increase 
the  yield  from  taxes  on  capital  and  wealth,  review  tax  expenditures  that  do  not 
effectively  achieve  the desired  level  of  redistribution  or other objectives,  or improve 
the  way  the  tax  system  supports  environmental  objectives.  On  the  spending  side, 
concerns remain related to the impact of the healthcare system’s cost-effectiveness on 
fiscal  sustainability.  Population  ageing  is  projected  to  lead  to  Ireland's  spending  on 
public  healthcare  to  increase  by  1.5  percentage  points  by  2070  as  a  percentage  of 
GDP, well above the projected EU-average increase of 0.4 percentage points. As the 
healthcare system is overly reliant on costly hospital care, exacerbated by the lack of 
universal  primary  care  coverage,  there  is  scope  for  reform  to  alleviate  the  strain  on 
hospitals. 

14 

From  2026  these  figures  will  appear  in  the  control  account  that  is  established  in  Article  22  of  the 
Regulation (EU) 2024/1263. 

EN 

6 

  EN 

 
(21) 

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  Ireland’s  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. 

(22)  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 Ireland. It is important 
to  continue  efforts  to  ensure  the  swift  implementation  of  these  programmes,  while 
maximising  their  impact  on  the  ground.  Ireland  is  already  taking  action  under  its 
cohesion policy programmes to boost competitiveness and growth. At the same time, 
Ireland  continues  to  face  challenges,  including  the  need  to  boost  competitiveness, 
especially  in  the  North  West  region,  which  is  lagging  behind  in  economic 
performance,  as  well  as  social  disparities  in  the  labour  market  integration  of 
disadvantaged groups.  In accordance with  Article 18 of Regulation  (EU)  2021/1060, 
Ireland is required – as part of the mid-term review of the cohesion policy funds – to 
review  each  programme  taking  into  account,  among  other  things,  the  challenges 
identified in the 2024 country-specific recommendations. The Commission proposals 
adopted on 1 April 202515 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. 

(23)  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. Ireland could use these 
initiatives  to  support  the  development  or  manufacturing  of  critical  technologies, 
including clean and resource-efficient technologies. 

(24)  Productivity  growth  in  Ireland  is  predominantly  driven  by  multinational  companies, 
while  productivity  among  domestic  businesses  –  mostly  small  and  medium  sized 
enterprises  –  is  comparatively  lower  than  their  EU  counterparts.  This  highlights  the 
need  to  boost  domestic  innovation  capacity.  Heightened  geopolitical  uncertainty 
emphasises  the  urgent  need  to  build  a  more  resilient,  innovation-driven  domestic 
economy. Public R&D spending in Ireland is one of the lowest in the EU, accounting 
for just 0.2% of GDP (0.4% of GNI*). Expanding public investment  in  R&D would 
not  only  strengthen  Ireland’s  innovation  system  but  also  foster  scientific  excellence, 
boost  economic resilience and support long-term,  sustainable  growth.  Furthermore,  a 

15 

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. 

EN 

7 

  EN 

 
(25) 

(26) 

significant  portion  of  government  support  for  business  R&D  takes  the  form  of  the 
R&D  tax  credit.  While  this  is  an  important  instrument  for  stimulating  private-sector 
R&D investment, increasing direct funding for research and innovation would provide 
more  targeted  support  for  SMEs  and  boost  their  capacity  to  innovate  and  contribute 
meaningfully to the wider economic ecosystem. 

Ireland  continues  to  rely  on  fossil-based  energy  sources.  This  dependence  poses  a 
significant  challenge  to  reducing  overall  GHG  emissions  and  to  meeting  Ireland’s 
target  under  the  Effort  Sharing  Regulation  to  reduce  non-ETS  emissions  by  42%  by 
2030 compared to 2005. The latest emission projections indicate that Ireland is not on 
track to meet this target.  

Ireland’s electricity system continued to show signs of stress  in 2024, as retail prices 
remained  significantly  above  the  EU  average.  This  entails  that  Irish  businesses  and 
consumers pay a premium on their consumption of electricity, which  in turn impacts 
production  costs  and  competitiveness  and  therefore  the  ability  to  attract  and  retain 
companies.  As  high  energy  costs  can  be  a  direct  obstacle  to  growth,  it  is  crucial  to 
tackle the cost drivers for the retail energy prices. Increased deployment of renewable 
energy,  particularly  offshore  wind,  can  reduce  retail  electricity  prices  and  the 
dependency  on  fossil  fuels,  which  is  subject  to  volatile  markets.  Streamlining  the 
planning  and  permitting  framework  for  renewables,  storage  facilities  and  electricity 
grid  investments  could  help  speed  up  and  incentivise  further  investments  in  the 
deployment of renewables. 

(27)  An indispensable element to leverage the energy cost reduction benefits deriving from 
further deployment of renewables is increased efforts to improve the flexibility of the 
electricity  system  and  modernise  and  expand  grid  capacity,  including  internal 
reinforcements  and  cross-border  projects,  to  reduce  curtailment.  In  2023,  nearly  a 
tenth of wind and solar power had to be curtailed due to capacity constraints, and this 
trend  has  been  increasing  in  recent  years.  This  keeps  prices  high  and  delays  the 
transition towards cleaner sources of energy. The anticipated additional deployment of 
renewable  energy,  increasing  electricity  demand  from  continued  electrification  of 
heating and transport,  and the growing  number of data centres  will  put further strain 
on  the  electricity  system.  This  highlights  the  need  to  construct  infrastructure  to  link 
increasing  demand  centres  with  the  supply  of  renewables  generation  and  to  update 
existing  network  infrastructure  to  increase  its  capacity.  A  related  element  concerns 
demand-side response, including  consumer empowerment  measures such as  ensuring 
that  private  consumers  have  access  to  dynamic  price  markets,  which  can  be  an 
important means to provide flexibility in the energy system. 

(28)  The  residential  sector  is  a  significant  source  of  Ireland’s  greenhouse  gas  emissions, 
generating 9.7% of domestic emissions in 2023, with the building stock being one of 
the most carbon-intensive stocks in the EU. Accelerating energy efficiency measures 
across  the  building  stock  would  help  meet  sectoral  emission  ceilings  and  strengthen 
Ireland’s energy security. Carrying out deep building retrofits and extending the roll-
out of low-emission technologies, including district heating, would reduce exposure to 
energy  price  volatility  while  supporting  competitiveness  and  environmental 
sustainability. 

(29)  A major challenge for Ireland concerns balancing the rising demand for energy due to 
economic  growth,  including  the  expansion  of  digital  infrastructure.  Despite  marked 
progress  on  reducing  the  energy  consumption  of  the  built  environment,  final  energy 
consumption increased by 0.7% in 2023. This is primarily the result of service-sector 

EN 

8 

  EN 

buildings  offsetting  the  efficiency  gains  from  investments  in  improving  the  energy 
efficiency  of  public  and  other  private  buildings.  Service-sector  buildings account  for 
around half of all electricity demand, with data centres representing 21% of Ireland's 
metered  electricity  demand  in  2023.  To  meet  climate  targets,  this  requires  sufficient 
renewable  energy  generation  to  avoid  monopolisation  of  available  renewable  energy 
capacity  and  it  requires  measures  to  increase  energy  efficiency,  appropriate 
infrastructure and flexibility. 

(30)  Sustainable mobility requires an integrated approach that tackles both the expansion of 
sustainable transport networks and the development of efficient charging infrastructure 
for  zero-emission  vehicles,  ensuring  equitable  access  across  regions  and  fostering 
long-term  economic  competitiveness.  Enhancing  public  transport  infrastructure, 
including  the  expansion  of  electrified  rail,  is  essential  for  decarbonisation  and 
economic  efficiency.  A  more  integrated  transport  network  could  alleviate  urban 
congestion,  boost  labour  mobility  and  support  sustainable  urban  growth.  Improving 
connectivity  between  rural  and  urban  areas  is  also  crucial  for  inclusive  economic 
development,  ensuring  that  all  regions  benefit  from  the  transition  to  a  low-carbon 
economy. With a ratio of one charging point for every 21 vehicles–well below the EU 
average of one charging point for every 7 vehicles – regional disparities, particularly 
in rural areas, remain a barrier to the uptake of zero-emission vehicles. 

(31) 

treatment  systems,  particularly 

Increased  investment  is  essential  to  tackle  the  persistent  deficiencies  in  supply  and 
wastewater 
in  urban  areas.  These  gaps  risk 
undermining  environmental  compliance  and  limiting  the  potential  for  sustainable, 
cross-sectoral  development,  including  housing  and  water-dependent  sectors.  High 
leakage  rates  –  at  37%  in  2023  –  remain  well  above  the  EU  average  of  25%,  while 
several  key  wastewater  treatment  plants  could  benefit  from  improved  performance. 
Despite  efforts  to  extend  coverage  and  reduce  discharges  of  untreated  wastewater, 
ageing  infrastructure  and  limited  treatment  capacity  continue  to  impede  progress  on 
water  quality  and  environmental  objectives.  Ireland  is  experiencing  more  frequent 
extreme  weather  events  due  to  climate  change  such  as  floods,  droughts  and  storms, 
which risks straining water supply networks and damaging infrastructure. Despite the 
sectoral adaptation plans developed under the national adaptation framework, effective 
and  coordinated  implementation  remains  important.  Discussions  on  bringing  in  a 
water-pricing mechanism have taken place in recent years, but implementation has not 
yet  advanced.  A  water-pricing  mechanism  that  better  reflects  the  cost  of  water  use 
could foster a stable and transparent framework for long-term investment and planning 
in  water  infrastructure,  while  also  promoting  a  more  efficient  and  sustainable 
consumption across sectors. 

(32)  Enhanced  investment  in  circular  economy  initiatives,  including  advanced  waste 
treatment infrastructure, is essential for Ireland to move up the waste hierarchy, foster 
resource  efficiency,  and  support  decarbonisation,  competitiveness  and  long-term 
economic  security.  Ireland  remains  below  EU  circular  economy  benchmarks,  with 
municipal waste recycling at 41% in 2020 and a circular material use rate of just 2.3% 
in  2023,  both  significantly  below  EU  averages.  Ireland  is  at  risk  of  missing  the 
municipal waste target for 2025. To meet environmental objectives, estimates suggest 
that  EUR 749  million  per  year  are  needed  to  address  circular  economy  investments. 
By reducing dependency on imported raw materials and increasing the value derived 
from domestic waste streams, the circular economy contributes to Ireland’s long-term 
economic security, making its economy more sustainable and resilient to global supply 
chain disruptions and price volatility. 

EN 

9 

  EN 

(33)  Homelessness doubled over the last three years, reaching a record of 15 000 people in 
emergency  accommodation.  Current  homelessness  prevention  schemes,  while 
effective,  have  been  unable  to  stop  this  increase,  due  to  the  scale  of  the problem.  In 
addition, there are 59 000 households on waiting lists for social housing and a further 
84 000 households on other rent supplement schemes. Rent pressure zones have been 
successful  in  decreasing  rental  price  inflation,  but  they  have  likely  contributed  to  a 
slowdown  of  private  investment  in  rental  stock.  The  construction  of  affordable  and 
social housing is scaling up but is still behind current needs and targets. This affects 
Ireland’s  competitiveness  by  putting  pressure  on  wages  and  limiting  the  ability  of 
businesses, particularly SMEs, to attract skilled workers. The public sector struggles to 
maintain sufficient workforce levels  in sectors such as education, healthcare services 
and  construction.  This  highlights  the  need  for  continued  action  to  address  capacity 
constraints  in  the  residential  construction  sector.  This  includes  lack  of  enabling 
infrastructure  such  as  water  and  utilities,  insufficient  land  availability,  planning 
uncertainties, insufficient financing options, lack of construction workers and the slow 
uptake of modern methods of construction. 

(34) 

(35) 

Ireland’s  labour  market  remains  robust  and  shows  low  unemployment  rates,  but  it 
remains a challenge to achieve inclusive growth that benefits all groups. Efforts have 
been  made  to  tackle  social  exclusion  and  barriers  to  employment;  however 
traditionally  underrepresented  groups,  such  as  people  with  a  disability  and  single 
parents, continue to have employment rates below the EU average. Consequently, they 
also face disproportionately high poverty risks. At the same time, skills shortages and 
mismatches persist in key sectors, highlighting the need for more outreach to inactive 
groups  and  to  invest  in  people’s  skills  to  promote  greater  social  inclusion,  help 
disadvantaged groups exit poverty and meet labour market needs. 

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 
the  euro  area.  For  Ireland, 
Recommendation  on 
recommendations (2), (3) and (4) help implement the first euro-area recommendation 
on  competitiveness,  while  recommendations  (4),  (5)  and  (6)  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. 

the  economic  policy  of 

HEREBY RECOMMENDS that Ireland take action in 2025 and 2026 to: 

1. 

2. 

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.  Reduce  the  risks  related  to  the 
high  degree  of  concentration  in  Ireland’s  tax  revenue,  including  by  broadening  the 
tax  base  and  reviewing  the  scope  and  impact  of  tax  expenditures.  Address  the 
expected  increase  in  age-related  spending  by  making  the  healthcare  system  more 
cost-effective. 

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 

EN 

10 

  EN 

3. 

4. 

5. 

6. 

of  EU  instruments,  including  the  opportunities  provided  by  the  InvestEU  and  the 
Strategic Technologies for Europe Platform, to improve competitiveness. 

Improve  the  business  environment  by  increasing  public  R&D  investment  and 
supporting the increase of business R&D investment - including through more direct 
funding  instruments  -  to  improve  the  productivity  of  domestic  businesses,  in 
particular of small and medium enterprises. 

Reduce overall reliance on fossil fuels and accelerate the deployment of renewables, 
including by streamlining the planning and permitting framework. Increase efforts to 
improve the flexibility of the electricity  grid and modernise and expand capacity to 
reduce  curtailment.  Develop  and  implement  a  strategy  to  promote  demand-side 
response.  Implement  additional  measures  that  support  energy  efficiency  in  private 
and public buildings to reduce energy bills and energy system costs. Ensure that the 
connection  of  large  energy  users  to  the  electricity  grid  is  linked  to  additional 
renewable  capacity  and  system  flexibility.  Support  investment  in  and  strengthen 
sustainable  transport,  including  public  transport,  taking  into  account  regional 
disparities.  Accelerate  the  installation  of  public  charging  points  for  zero-emission 
vehicles. 

Increase  investment  in  water  infrastructure,  to  improve  water  quality  and  reduce 
leakages.  Accelerate investments to speed up the circular economy. Further develop 
both  waste  treatment  infrastructure  associated  with  the  higher  steps  of  the  waste 
hierarchy  and  economic  instruments  to  prevent  waste  and  increase  reused, 
remanufactured and recycled content. 

in 

the 

Further  increase  the  supply  of  social  and  affordable  housing.  Tackle  capacity 
constraints 
improving  enabling 
residential  construction  sector  by 
infrastructure,  land  management  and  planning,  financing  conditions,  labour  supply 
and productivity. Strengthen the labour market and social inclusion of disadvantaged 
groups, in particular persons with disabilities and single parents, by putting in place 
better targeted outreach and upskilling. 

Done at Brussels, 

For the Council 
The President 

EN 

11 

  EN