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

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   EUROPEAN COMMISSION  Brussels, 4.6.2025  COM(2025) 227 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Sweden {SWD(2025) 227 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

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

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,  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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2 

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.  Sweden  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,  Sweden  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 May  2022,  the  Council  adopted  its 
Implementing Decision approving the assessment of the recovery and resilience plan 
for Sweden6, which was amended under Article 18(2) on 9 November 2023 to update 
the maximum financial contribution for non-repayable financial support, as well as to 

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 May 2022 on the approval of the assessment of the recovery and 
resilience plan for Sweden (ST 7772/2022; ST7772/2022 ADD1). 

the  Recovery  and  Resilience  Facility 

(2) 

(3) 

(4) 

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(5) 

(6) 

(7) 

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 Sweden 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 endorsing the national medium-term fiscal-structural plan 
of Sweden8. 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 
sets a budgetary constraint in the form of a maximum net expenditure growth rate over 
four years. 

On  26 November  2024,  on  the  basis  of  Regulation  (EU)  No 1176/2011,  the 
Commission adopted the 2025 Alert Mechanism Report, in which it identified Sweden 
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 

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Council  Implementing  Decision of 9 November  2023  amending  the Implementing  Decision  of  4 May 
2022  on  the  approval  of  the  assessment  of  the  recovery  and  resilience  plan  for  Sweden  (ST 
14474/2023). 
Council  Recommendation  of  21 January  2025  endorsing  the  medium-term  fiscal-structural  plan  of 
Sweden, OJ C/2025/644/, 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) 

(9) 

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. 

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.  

in 

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

(11)  The  Commission  carried  out  an  in-depth  review  under  Article 5  of  Regulation  (EU) 
No 1176/2011  for  Sweden.  The  main  findings  of  the  Commission’s  assessment  of 
macroeconomic  vulnerabilities  for  Sweden  for  the  purposes  of  that  Regulation  were 
published on 13 May 202510. On 4 June 2025, the Commission concluded that Sweden 
is experiencing macroeconomic imbalances. In particular, vulnerabilities related to its 
real  estate  market  and  high  private  debt  remain  relevant  despite  some  recent 
moderation,  and  the  identified  vulnerabilities  persist  in  the  absence  of  firm  action. 
Despite  some  moderation,  household  and  corporate  debt-to-GDP  readings  remain 
among the highest in the EU, while house prices were constant in nominal terms but 
continue  to  be  overvalued.  Tightened  financial  conditions  has  also  led  to  a  slump  in 
housing  construction  and  put  additional  pressure  on  households  and  business 
expenditure, and the financial sector continues to be highly exposed to the real estate 
sector,  including  commercial  real  estate.  Policy  progress  has  been  limited.  Policy 
settings  continue  to  favour  debt-financed  house  acquisition  while  housing  supply 
shortages  linger.  Taxation  continues  to  incentivise  debt-financed  house  ownership 
through the significant tax deductibility of mortgage interest payments. Measures that 
increase housing supply going forward would help moderate house price growth, but 
are no substitute for reforms addressing the main drivers of household debt. The rental 
market has not yet been reformed. These vulnerabilities may worsen should a re surge 
in  debt-financed  housing  acquisition  and  house  price  overvaluation  materialise  on 

10 

SWD(2025)124 final. 

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account  of  macroprudential  measures  being  eased,  which  seem  to  be  under 
consideration, on the top of more benign financing conditions. 

Assessment of the Annual Progress Report 

(12)  On 21 January 2025 the Council recommended the following maximum growth rates 
of net expenditure for Sweden: 4.0% in 2025, 4.4% in 2026, 4.4% in 2027, and 4.6% 
in  2028,  which  correspond  to  the  maximum  cumulative  growth  rates  calculated  by 
reference  to  2023  of  10.7%  in  2025,  15.5%  in  2026,  20.6%  in  2027,  and  26.1%  in 
2028. On 30 April 2025 Sweden submitted its Annual Progress Report11 on adherence 
to 
the 
the  recommended  maximum  growth  rates  of  net  expenditure  and 
implementation  of  reforms  and  investments  responding  to  the  main  challenges 
identified  in  the  European  Semester  country-specific  recommendations.  The  Annual 
Progress  Report  also  reflects  Sweden’s  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 Eurostat12, Sweden’s general government deficit increased 
from a deficit of 0.8% of GDP in 2023 to a deficit of 1.5% in 2024, while the general 
government debt rose from 31.6% of GDP at the end of 2023 to 33.5% at the end of 
2024. According to the Commission’s calculations, these developments correspond to 
a net expenditure growth rate of 6.1% in 2024. In the Annual Progress Report, Sweden 
estimates  the  net  expenditure  growth  in  2024  at  6.1%.  Based  on  the  Commission’s 
estimates,  the  fiscal  stance13,  which  includes  both  nationally  and  EU  financed 
expenditure, was expansionary, by 0.7% of GDP, in 2024. 

(15)  According to the Annual Progress Report, the macroeconomic scenario underpinning 
the budgetary projections by Sweden expects real GDP growth at 2.1% in 2025, while 
HICP  inflation  is  projected  at  2.1%  in  2025.  The  Commission  Spring  2025  Forecast 
projects real GDP to grow by 1.1% in 2025 and 1.9% in 2026, and HICP inflation to 
stand at 2.2% in 2025 and 1.6% in 2026. 

(16) 

In the Annual Progress Report, the general government deficit is expected to decrease 
to  1.3%  of  GDP  in  2025,  while  the  general  government  debt-to-GDP  ratio  is  set  to 
increase to 34.3% of GDP by the end of 2025. These developments correspond to net 
expenditure growth of 4.1% in 2025. The Commission Spring 2025 Forecast projects a 
general government deficit of 1.5% of GDP in 2025. According to the Commission’s 
calculations,  these  developments  correspond  to  a  net  expenditure  growth  of  1.7%  in 

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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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2025.  This  lower  growth  rate  of  net  expenditure  compared  to  the  rate  in  the  Annual 
Progress  Report  reflects  different  projections  of,  inter  alia,  compensation  of 
employees  and  social  transfers  in  kind  by  market  producers.  Based  on  the 
Commission’s  estimates,  the  fiscal  stance,  which  includes  both  nationally  and  EU 
financed expenditure, is projected to be contractionary, by 0.7% of GDP, in 2025. The 
general government debt-to-GDP ratio is set to increase to 33.8% by the end of 2025. 

(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 Sweden.  

(18)  General  government  defence  expenditure  in  Sweden  amounted  to  1.3%  of  GDP  in 
2021,  1.7%  of  GDP  in  2022  and  1.8%  of  GDP  in  202314.  According  to  the 
Commission  Spring  2025  Forecast,  expenditure  on  defence  is  projected  at  2.3%  of 
GDP  in  2024  and  2.5%  of  GDP  in  2025.  This  corresponds  to  an  increase  of  1.2 
percentage points of GDP compared to 2021. 

(19)  According  to  the  Commission  Spring  2025  Forecast,  net  expenditure  in  Sweden  is 
projected to grow by 1.7% in 2025 and 7.9% cumulatively in 2024 and 2025. Based on 
the Commission Spring 2025 Forecast, the net expenditure growth of Sweden in 2025 
is projected to be below the recommended maximum growth rate, both annually and 
when considering 2024 and 2025 together. 

(20)  The  Annual  Progress  Report  does  not  include  budgetary  projections  beyond  2025. 
Based on policy measures known at the cut-off date of the forecast, the Commission 
Spring 2025 Forecast projects a general government deficit of 0.8% of GDP in 2026. 
These developments correspond to net expenditure growth of 2.6% in 2026. Based on 
the Commission’s estimates, the fiscal stance, which includes both nationally and EU 
financed expenditure, is projected to be contractionary, by 0.4% of GDP, in 2026.The 
general government debt-to-GDP ratio is projected by the Commission to decrease to 
33.3% by the end of 2026.  

Key policy challenges 

(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  Sweden’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 Sweden. It is important 

14 

Eurostat, government expenditure by classification of functions of government (COFOG). 

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to  continue  efforts  to  ensure  the  swift  implementation  of  these  programmes,  while 
maximising  their  impact  on  the  ground.  Sweden  is  already  taking  action  under  its 
cohesion policy programmes to boost competitiveness and growth. At the same time, 
Sweden  continues  to  face  challenges  including  skills  shortages  and  mismatches,  and 
there  could  be  scope  to  enhance  regional  growth  taking  into  account  regional  needs 
relating to competitiveness, energy transition and water resilience. In accordance with 
Article  18  of  Regulation  (EU)  2021/1060,  Sweden  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. Sweden could use these 
initiatives  to  support  the  development  or  manufacturing  of  critical  technologies, 
including clean and resource-efficient technologies. 

(24)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan  and  other  EU  funds,  Sweden  faces  several  additional  challenges  related  to: 
(i) deteriorating  educational  outcomes  of  pupils, 
from 
disadvantaged  socio-economic  and  migrant  backgrounds;  (ii)  skills  gaps,  which  are 
most  pronounced  for  people  from  disadvantaged  socio-economic  and  migrant 
backgrounds; (iii) high levels of private debt coupled with overvalued real estate; (iv) 
the  reduction  of  greenhouse  gas  emissions,  and  (v)  power  grid  capacity  and 
transmission constraints linked to the deployment of renewables. 

in  particular 

those 

(25)  The results of the 2022 Programme for International Student Assessment (PISA) show 
that  the  decline  in  the  basic  skills  of  Swedish  students  since  2018  is  among  the 
sharpest  in  the  EU,  particularly  in  mathematics.  Underachievement  in  basic  skills  is 
especially  high  for  students  with  a  migrant  or  disadvantaged  socio-economic 
background, and the increase in underachievement for those with disadvantaged socio-
economic  background  is  even  higher.  There  is  also  a  significant  performance  gap 
between native-born and foreign-born students, and pupils with a migrant background 
are  more  likely  to  be  concentrated  in  certain  schools.  Students  from  disadvantaged 
backgrounds  are  also  underrepresented  in  private  schools,  whose  pupils  have  on 
average better chances of qualifying for further studies. In 2022, 15% of all students 
finishing  lower  secondary  school  had  grades  that  were  too  low  or  incomplete, 
excluding them from qualifying for upper secondary school. The ongoing shortage of 
qualified teachers, especially in schools with a high number of disadvantaged students, 
poses a risk to the quality of the education system and further aggravates the declining 
education outcomes. 

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. 

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(26)  Sweden continues to face challenges in integrating people from vulnerable groups, in 
particular  people  from  disadvantaged  and  migrant  backgrounds,  into  the  labour 
market, as well as reducing the remaining skills gaps. In 2023, Sweden had the highest 
unemployment  rate  in  the  EU  for  people  born  outside  the  EU,  whereby  the  gap 
between those born outside the EU and native-born Swedes remains particularly high. 
Among people from the vulnerable groups registered as unemployed, almost half lack 
upper secondary education and many also lack the basic prerequisites for finding a job 
or  studying,  including  language  skills.  As  completing  upper  secondary  education  is 
essential  for  getting  a  job  in  Sweden,  further  measures  would  be  needed  to  support 
students  pursuing upper secondary, higher or vocational  education  and training. This 
would help increase the supply of skilled labour to support employment, productivity 
growth, and the growth potential of the Swedish economy. 

(27)  Labour  and  skills  shortages  in  sectors  and  occupations  key  for  the  green  transition, 
including  the  manufacturing,  deployment  and  maintenance  of  net-zero  technologies, 
are  creating  bottlenecks  in  the  transition  to  a  net-zero  economy  in  Sweden.  There  is 
high demand for engineers and green transition specialists particularly in the north of 
the country. Therefore, further improving the labour market relevance of the education 
and  training  systems  on  offer  that  respond  to  changing  labour  market  needs  and 
targeted  upskilling  and  reskilling  measures  are  key  to  reducing  skills  shortages  and 
promoting labour inclusion and reallocation. 

(28)  High levels of private debt and overvalued property prices constitute macroeconomic 
imbalances  that  continue  to  be  at  risk  of  disorderly  unwinding.  House  prices  remain 
high,  while  supply  shortages  linger  as  construction  of  new  homes  remains  below 
forecast  demand.  This  shortage  is  linked  to  structural  inefficiencies,  such  as  limited 
competition  in  the  construction  sector  due  to  barriers  to  entry  for  small  and  foreign 
firms  and  the  ability  of  large  developers  to  control  land  resources.  The  overall  tax 
burden  on  property  remains  relatively  low  because  of  generous  tax  deductions  on 
mortgage  interest  payments  and  low  recurrent  property  taxes.  The  impact  of  policy 
changes  on  after-tax  mortgage  payments  is  difficult  to  assess  due  to  a  lack  of 
individual household data on assets and liabilities. Availability of such data could lead 
to  efficiency gains  in  the design  of policy, possibly  lowering the  entry barrier to  the 
housing  market  and  spreading  housing  burdens  more  equally  among  the  population. 
The  rental  market  offers  few  alternatives  and  still  needs  to  be  reformed  to  reduce 
waiting lists and promote the construction of rental accommodation. Any loosening of 
macroprudential  policy ahead of reforms  to  tackle existing  market  dysfunction could 
lead to higher house prices while simultaneously increasing household debt. 

(29)  With its current policies, Sweden is not on track to meet its 2030 EU targets to reduce 
greenhouse gas emissions. The country’s greenhouse gas emissions increased in 2024 
and several studies by official and independent  bodies suggest that Sweden’s current 
policies  will  result  in  a  significant  shortfall  of  the  EU’s  2030  climate  targets.  In 
particular,  this  shortfall  reflects  recent  policy  changes,  including  lower  biofuel 
blending obligations and reduced taxes on liquid fuels, which have led to an increase 
in  emissions from  road transport, the main source of greenhouse gas  emissions from 
fossil fuels in Sweden.  

(30)  Although  Sweden  continues  to  be  the  Member  State  with  the  highest  share  of 
renewables  in  its  final  energy  consumption,  constraints  in  power  grid  capacity  and 
transmission  may  hinder  the  further  deployment  of  renewable  energy  sources. 
Removing  these  constraints  is  pivotal,  as  Sweden’s  final  electricity  consumption  is 
expected  to  rise  significantly  in  the  period  to  2045,  driven  by  the  increased 

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electrification needs of industry and transport. Improving access to Sweden’s untapped 
potential for renewables  could  accommodate the  ongoing  electrification of industries 
in the south of the country, and support the innovative, green industrial developments 
and decarbonisation in the north. Reducing energy consumption by increasing energy 
efficiency  is  also  essential  to  help  reduce  carbon  emissions  and  control  energy  costs 
for  households  and  businesses.  On  energy  efficiency,  given  the  energy  consumption 
trajectory,  Sweden is  at  risk of not achieving its  national  target of  increasing  energy 
efficiency by 50% by 2030 compared to 2005. With a primary energy consumption of 
over  41  Mtoe  in  2023,  Sweden  remains  among  the  Member  States  with  the  highest 
energy consumption per capita. 

(31)  There  are  still  several  obstacles  to  expanding  the  country’s  renewable  energy 
production  capacity.  One  such  obstacle  is  unpredictable  permitting  for  both  offshore 
and  onshore  wind  power.  Barriers  emanating  from  inefficient  permitting  procedures 
and  veto  rights  of  municipalities  and  defence  authorities,  among  other  things,  create 
investment  uncertainty  and  hinder  the  exploitation  of  the  potential  provided  by 
renewables. 

(32) 

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  (5).  Policies  referred  to  in  recommendation  (5)  help  to 
address vulnerabilities linked to the real estate market and high private debt. 

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

1. 

2. 

3. 

4. 

5. 

Reinforce overall defence spending and readiness in line with the European Council 
conclusions  of  6  March  2025.  Adhere  to  the  maximum  growth  rates  of  net 
expenditure recommended by the Council on 21 January 2025. 

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

Ensure the achievement of greenhouse gas emissions reduction targets by reducing, 
in  particular  emissions  from  road  transport.  Reduce  reliance  on  fossil  fuels  by 
accelerating  the  deployment  of  renewables,  including  by  expanding  and  upgrading 
energy  transmission  networks,  and improving  energy  efficiency.  Accelerate  and 
streamline permitting procedures for deploying renewables, particularly for offshore 
and onshore wind energy, and avoid permitting approval reversals. 

Improve  educational  performance,  including  of  students  from  disadvantaged  socio-
economic  and  migrant  backgrounds,  by  addressing  the  persistent  shortage  of 
qualified  teachers,  by  ensuring  equal  access  opportunities  to  the  schooling  system 
and  by  further  supporting  the  transition  of  students  to  upper  secondary  school. 
Develop  the skills  of the labour force, particularly those from  disadvantaged socio-
economic and migrant backgrounds, through targeted policy measures and resources 
to improve their integration into the labour market.  

Improve  the  efficiency  of  the  housing  market,  including  by  introducing  reforms  in 
the  rental  market.  Stimulate  investment  in  residential  construction  to  ease  the  most 
urgent  shortages.  Remove  structural  obstacles  to  facilitate  residential  construction. 

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Address  risks  related  to  high  household  debt  by  gradually  reducing  the  tax 
deductibility  of  mortgage  interest  payments  or  increasing  recurrent  property  taxes, 
while  developing  appropriate  tools  to  better  assess  and  target  policies.  Maintain 
macroprudential measures. 

Done at Brussels, 

For the Council 
The President 

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