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

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   EUROPEAN COMMISSION  Brussels, 4.6.2025  COM(2025) 224 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Slovenia {SWD(2025) 224 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

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

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 

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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. 

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(2) 

(3) 

(4) 

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.  Slovenia  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 30 April 2021, Slovenia 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  20 July  2021, the Council adopted its 
Implementing Decision approving the assessment of the recovery and resilience plan 
for Slovenia5, which was amended under Article 18(2) on 16 October 2023 to update 
the maximum financial contribution for non-repayable financial support, as well as to 
include  the  REPowerEU  chapter6.  The  release  of  instalments  is  conditional  on  the 
adoption  of  a  decision  by  the  Commission,  in  accordance  with  Article 24(5),  stating 
that Slovenia has satisfactorily achieved the relevant milestones and targets set out in 
the  Council  Implementing  Decision.  Satisfactory  achievement  requires  that  the 

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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 20 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Slovenia (10612/21). 
Council  Implementing  Decision  of  16 October  2023  amending  the  Implementing  Decision  of  20 July 
2021 on the approval of the assessment of the recovery and resilience plan for Slovenia (13615/1/23). 

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(5) 

(6) 

(7) 

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 Slovenia7. 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  Slovenia.  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 Slovenia 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  area8  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 
under the European Semester, as the plans help effectively address all or a significant 
subset  of  challenges  identified  in  the  relevant  country-specific  recommendations 

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

in  addressing 

Assessment of the Annual Progress Report 

(11)  On 21 January 2025 the Council recommended the following maximum growth rates 
of net expenditure for Slovenia: 5.6% in 2025, 4.4% in 2026, 4.1% in 2027, and 4.0% 
in  2028,  which  correspond  to  the  maximum  cumulative  growth  rates  calculated  by 
reference  to  2023  of  12.1%  in  2025,  17.0%  in  2026,  21.8%  in  2027,  and  26.6%  in 
2028. On 28 April 2025 Slovenia submitted its Annual Progress Report9, on adherence 
the 
the  recommended  maximum  growth  rates  of  net  expenditure  and 
to 
implementation  of  reforms  and  investments  responding  to  the  main  challenges 
identified  in  the  European  Semester  country-specific  recommendations.  The  Annual 
Progress  Report  also  reflects  Slovenia’s  biannual  reporting  on  the  progress  made  in 
achieving its recovery and resilience plan in accordance with Article 27 of Regulation 
(EU) 2021/241. 

(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 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. 
Following the request  of Slovenia on 29 April 2025, on [date] the Council, upon the 
recommendation of the Commission, adopted a recommendation allowing Slovenia to 
deviate  from,  and  exceed,  the  recommended  maximum  growth  rates  of  net 
expenditure10.  

(13)  Based  on  data  validated  by  Eurostat11,  Slovenia’s  general  government  deficit 
decreased from 2.6% of GDP in 2023 to 0.9% in 2024, while the general government 
debt  fell  from  68.4%  of  GDP  at  the  end  of  2023  to  67.0%  at  the  end  of  2024. 
According to the Commission’s calculations, these developments correspond to a net 
expenditure  growth  rate  of  4.5%  in  2024.  In  the  Annual  Progress  Report,  Slovenia 

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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 
Council  recommendation  allowing  Slovenia  to  deviate  from,  and  exceed,  the  recommended  net 
expenditure path (Activation of the national escape clause) [Please Complete: OJ C/2025/xxx, x.x.2025]. 
Eurostat-Euro Indicators, 22.4.2025. 

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estimates  the  net  expenditure  growth  in  2024  also  at  4.5%.  Based  on  the 
Commission’s  estimates,  the  fiscal  stance12,  which  includes  both  nationally  and  EU 
financed expenditure, was contractionary, by 1.1% of GDP, in 2024. 

(14)  According to the Annual Progress Report, the macroeconomic scenario underpinning 
the budgetary projections by Slovenia expects real GDP growth at 2.1% in 2025 and 
2.4%  in  2026,  while  HICP  inflation  is  projected  at  2.3%  in  2025  and  2.3%  in  2026. 
The  Commission  Spring  2025  Forecast  projects  real  GDP  to  grow  by  2.0%  in  2025 
and 2.4% in 2026, and HICP inflation to stand at 2.1% in 2025 and 1.9% in 2026. 

(15) 

In the Annual Progress Report, the general government deficit is expected to increase 
to  1.9%  of  GDP  in  2025,  while  the  general  government  debt-to-GDP  ratio  is  set  to 
decrease  to  66.0%  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  deficit  of  1.3%  of  GDP  in  2025.  The  increase  of  the  deficit  in 
2025  mainly  reflects  lower  property  income  and  higher  compensation  of  employees 
due  to  the  phasing  in  of  the  public  sector  wage  reform.  According  to  the 
Commission’s  calculations,  these  developments  correspond  to  a  net  expenditure 
growth of 4.6% in 2025. These lower projections of net expenditure growth than in the 
Annual  Progress  Report  and  the  difference  between  the  general  government  balance 
projected by Commission and Slovenia are mostly due to a lower projection of gross 
fixed  capital  formation  and  different  assessment  of  discretionary  revenue  measures. 
The  Commission  also  projects  higher  revenue  from  taxes  on  production and  imports 
and  from  social  contributions  that  further  explain  the  difference  between  the  general 
government  balance  as  projected  by  Commission  and  Slovenia.  Based  on  the 
Commission’s  estimates,  the  fiscal  stance,  which  includes  both  nationally  and  EU 
financed expenditure, is projected to be expansionary, by 0.3% of GDP, in 2025. The 
general government debt-to-GDP ratio is set to decrease to 65.5% by the end of 2025. 

(16)  General  government  expenditure  amounting  to  0.9%  of  GDP  is  expected  to  be 
financed  by  non-repayable  support  (“grants”)  from  the  Recovery  and  Resilience 
Facility  in  2025,  compared  to  0.3%  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 Slovenia.  

(17)  General government defence expenditure in Slovenia remained stable at 1.2% of GDP 
between  2021  and  202313.  According  to  the  Commission  Spring  2025  Forecast, 
expenditure  on  defence  is  projected  at  1.4%  of  GDP  in  2024  and  1.6%  of  GDP  in 
2025. This  corresponds  to an increase of  0.4 percentage points  of GDP  compared to 
2021.  The  period  when  the  national  escape  clause  is  activated  (2025-2028)  allows 
Slovenia  to  reprioritise  government  expenditure  or  increase  government  revenue  so 
that  lastingly  higher  defence  expenditure  would  not  endanger  fiscal  sustainability  in 
the medium term.  

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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).  

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(18)  According  to  the  Commission  Spring  2025  Forecast,  net  expenditure  in  Slovenia  is 
projected to grow by 4.6% in 2025 and 9.3% cumulatively in 2024 and 2025. Based on 
the Commission Spring 2025 Forecast, the net expenditure growth of Slovenia in 2025 
is projected to be below the recommended maximum growth rate, both annually and 
when considering 2024 and 2025 together. 

(19)  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  government  deficit  of  1.5%  of  GDP  in  2026.  The 
increase  of  the  deficit  in  2026  mainly  reflects  higher  compensation  of  employees. 
These developments correspond to net expenditure growth of 7.0% in 2026. Based on 
the Commission’s estimates, the fiscal stance, which includes both nationally and EU 
financed expenditure, is projected to be expansionary, at 0.8% of GDP, in 2026. The 
general government debt-to-GDP ratio is projected by the Commission to decrease to 
63.8% by the end of 2026. 

Key policy challenges 

(20)  Although Slovenia’s tax-to-GDP ratio remains below the EU average, its composition 
is  not  very  growth-friendly.  The  top  personal  income  tax  bracket  and  the  labour  tax 
wedge14 for a single person for various income levels remain among the highest in the 
EU. At the same time, property taxes, including recurrent property taxes, remain very 
low, with  a share below half the EU  average. Reducing  the labour tax  wedge would 
bring  down  labour  costs,  boost  labour  demand  and  improve  competitiveness. 
Moreover,  higher  net  wages  could  increase  labour  supply.  Although  the  share  of 
environmental tax revenue is above the EU average, the tax system could be used to 
further promote green objectives, including by applying the ‘polluter pays’ principle. 

(21)  A substantial increase in ageing costs is projected for Slovenia, resulting in increases 
in spending on healthcare, long-term care and pension systems in the coming decades. 
The  recovery  and  resilience  plan  already  contains  several  measures  to  support  the 
fiscal  sustainability  of  these  systems  and  the  introduction  of  a  review  clause  in  the 
Long-Term  Care  Act  can  be  considered  a  major  improvement.  Beyond  the  plan,  it 
would nevertheless be important to monitor spending to ensure the adequacy and fiscal 
sustainability of social protection as many elements of the above systems are still not 
finalised  and  the  economic  environment  is  in  constant  flux.  Spending  reviews  are 
recognised  as  a  useful  tool  for  identifying  areas  of  lower  priority  or  inefficient 
spending and the savings made as a result could be reallocated to address new fiscal 
challenges  in  defence,  and  the  digital  and  green  transformations  and  for  closing  the 
innovation gap where expenditure will have to be sustained at a higher level. 

(22) 

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  Slovenia’s  long-term 
competitiveness  through  the  green  and  digital  transitions,  while  ensuring  social 
fairness. To deliver on the commitments of the recovery and resilience plan by August 

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The  tax  wedge  is  defined  as  the  sum  of  personal  income  taxes  and  employee  and  employer  social 
security contributions net of family allowances, expressed as a percentage of total labour costs. 

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2026,  it  is  essential  for  Slovenia  to  accelerate  the  implementation  of  reforms  and 
investments  by  addressing  relevant  challenges.  Investments  are  highly  concentrated 
towards the end of the implementation period, which could create significant capacity 
challenges  at  various  levels.  This  therefore  merits  special  attention.  The  systematic 
involvement  of 
local  and  regional  authorities,  social  partners,  civil  society 
organisations  and  other  relevant  stakeholders  remains  essential  to  ensure  broad 
ownership for the recovery and resilience plan to be successfully implemented. 

(23)  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+)  and  the  Cohesion  Fund  (CF),  has 
accelerated  in  Slovenia.  It  is  important  to  continue  efforts  to  ensure  the  swift 
implementation  of  these  programmes,  while  maximising  their  impact  on  the  ground. 
Slovenia  is  already  taking  action  under  its  cohesion  policy  programmes  to  boost 
competitiveness and growth. At the same time, Slovenia continues to face challenges, 
including  the  need  to  enhance  competitiveness  by  focusing  on  innovation,  including 
by developing and manufacturing critical technologies, as well as challenges related to 
the  energy  transition,  water  resilience  and    housing,  which  are  especially  relevant  to 
urban  centres  and  areas  facing  high  tourism,  skills  shortages  and  mismatches, 
including  in  relation  to  digital  and  green  skills,  the  labour  market  integration  of 
migrant  workers  and  vulnerable  groups,  deinstitutionalisation  and  development  of 
quality, adequate and affordable community-based social services. In accordance with 
Article  18  of  Regulation  (EU)  2021/1060,  Slovenia  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. 

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

(25)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan  and  other  EU  funds,  Slovenia  faces  several  additional  challenges  related  to  the 
energy  sector,  sustainable  transport,  climate  resilience  and  environment,  business 
environment, competitiveness and labour shortages. 

(26)  As  set  in  the  Competitiveness  Compass,  all  the  EU,  national,  and  local  institutions 
must  make  a  major  effort  to  produce  simpler  rules  and  to  accelerate  the  speed  of 
administrative  procedures.  The  Commission  has  set  ambitious  goals  for  reducing 
administrative burden: by at least 25% and by at least 35% for SMEs; and has created 

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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new  tools  to  achieve  these  goals,  including  systematic  stress  test  of  the  stock  of  EU 
legislation and enhanced stakeholders’ dialogue. To match this ambition, Slovenia also 
needs  to  take  action.  67%  of  businesses  consider  the  complexity  of  administrative 
procedures  to  be  a  problem  for  their  company  when  doing  business  in  Slovenia16. 
Regulatory  hurdles  in  certain  sectors  remain  higher  than  in  the  rest  of  the  EU. 
Reducing regulatory barriers in the professional services sector would make entry into 
this sector easier and may improve quality and lower prices as well as help achieve the 
EU’s simplification goals. In particular, the legal profession is more strictly regulated 
than in other EU countries. With tightness in the labour market expected to persist as 
the  population  ages,  restrictions  in  these  professions  negatively  affect  economic 
activity  and  can  constrain  growth  in  the  long  term.  Slovenia  is  one  of  the  most 
restrictive  Member  States  for  trade  in  services  based  on  the  OECD  trade 
restrictiveness index.  

(27)  Slovenia’s business  dynamism  has weakened over recent  years. The creation of new 
companies, and the winding-down of inefficient companies, is important so resources 
can  be  reallocated  efficiently  to  more  productive  uses  and  more  innovative  products 
and services. Until 2020, the entry and exit of companies from the market was higher 
than  the  EU  average,  reflecting  a  strong  ability  to  adjust  to  new  opportunities,  but  a 
slowdown  has  been  noticeable  in  recent  years,  due,  in  particular,  to  a  decline  in  the 
exit rate of companies. While the exit of companies from the market cannot be seen as 
an objective in itself, measures to protect the existing production structure should not 
be excessive. Additional birth and growth of new companies could help to increase the 
productivity and competitiveness of the economy. 

(28)  Slovenian companies mainly rely on bank loans and are rarely able to tap the financial 
markets for bond or equity funding. At the end of 2023, the share of bank loans in all 
funding  sources  of  non-financial  corporations  in  Slovenia  was  similar  to  the  EU 
average, but the share of listed shares and bonds was only a third of the EU average. 
More capital other than loans would allow  companies in Slovenia to undertake more 
ambitious,  development-oriented  investments  with  higher  risk.  In  particular,  venture 
capital  investment  relative  to  GDP  is  among  the  lowest  in  the  EU,  hindering  the 
growth of start-up companies. Institutional investors do not participate sufficiently in 
these  markets.  Further  improving  the  conditions  for  equity  funding  and  venture 
capital, such as by encouraging pension fund investment, and investment of household 
savings  through  the  individual  investment  accounts,  could  help  attract  more  foreign 
capital and help innovative start-ups to scale up. 

(29)  According  to  the  2024  European  Innovation  Scoreboard17,  Slovenia’s  innovation 
performance remained slightly below the EU average in 2024 and improved less than 
the  EU  average  between  2017  and  2024.  In  Slovenia,  public  research  expenditure, 
non-research  innovation  expenditure  by  companies  and  innovation  expenditure  per 
employee  are  still  relatively  low.  To  reach  its  own  objective  of  becoming  a  leading 
innovator by 2030, Slovenia would need to accelerate its R&D investment in line with 
the  commitments  made  in  its  RDI  strategy  under  its  recovery  and  resilience  plan. 
Implementing  relevant  legislation  fully  and  rapidly  could  provide  a  good  basis  for 
research investment and help enable this goal to be reached. 

16 
17 

‘Businesses' attitudes towards corruption in the EU’ Flash Report, Eurobarometer Report (April 2024) 
European Innovation Scoreboard - Slovenia. 

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(30)  Based  on  the  Commission’s  business  confidence  survey18,  business  managers  in 
Slovenian  industry  have  been  reporting  labour  shortages  as  a  major  factor  limiting 
economic  activity  since  mid-2021.  Vacancy  rates  are  close  to  the  EU  average.  With 
the labour  market  expected to  remain  tight,  the overall skills  mismatch is  a concern. 
The  skills  available  do  not  meet  the  demand  in  the  labour  market.  In  2024,  job 
vacancy rates in key sectors such as industry, construction and services remained high, 
although these decreased compared to the previous year. Almost half of all employers 
faced  difficulties  in  hiring  suitable  workers,  including  among  vocationally  and  post-
secondary-educated  individuals,  undermining  the  productivity  of  firms  and  their 
ability to innovate. 

(31)  Between 2018 and 2022, basic skills among 15-year-olds deteriorated, which poses a 
challenge  for  skills  development  in  the  future.  While  between  2015  and  2018, 
underachievement  was  close  to  the  EU  level  target  of  15%,  it  rose  significantly  in 
mathematics and reading between 2018 and 2022. Teacher shortages have been rising 
as  maintaining  the  attractiveness  of  the  teaching  profession  became  a  challenge.  In 
2022, approximately 42% of students  in  Slovenia attended schools where instruction 
was compromised by a lack of teaching staff. 

(32)  Based  on  job  vacancy  data,  ICT  professionals,  particularly  new  ICT  graduates,  are 
scarce.  This  poses  a  challenge  for  meeting  the  needs  of  digital  transformation  in  the 
corporate sector. The lack of digital skills among the population is a challenge for the 
entire  adult  population,  but  particularly  for  unemployed  people  and  those  lacking 
access  to  digital  tools.  Special  attention  should  also  be  paid  to  green  skills,  as 
shortages  of  workers  are  prevalent  across  many  occupations  requiring  specialised 
skills or expertise essential for the green transition. 

(33)  While the workforce lacks skills relevant to the labour market, including in digital and 
STEM fields, participation in adult learning has declined. Slovenia falls well short of 
its  ambitious  target  of  a  60%  participation  rate.  The  lack  of  digital  skills  among  the 
adult  population  presents  a  barrier  for  many  to  move  into  more  skilled  employment 
sectors.  The  challenges  were  most  pronounced  among  individuals  who  are  older  or 
have  lower-level  qualifications,  those  with  a  migrant  background,  and  non-working 
people. 

(34)  Foreign-born workers currently make up 15% of the country’s workforce. Since 2019, 
the  number  of  foreign  workers  has  increased  by  48.7%.  Most  of  these  workers  are 
low-skilled:  9  out  of  10  have  at  most  primary  school  education  and  more  than  one 
third are on the minimum wage. The Slovenian labour market has benefited from the 
inflow  of  these  workers  but  there  are  continued  shortages,  also  for  the  high-skilled 
jobs. Despite measures taken, there is still a significant backlog of permit applications 
submitted by foreign workers, due to excessively cumbersome legal requirements. 

(35)  Labour and skills shortages hinder the smooth provision of services particularly in the 
care  and  teaching  sectors.  Vacancy  rates  in  the  care  sector  and  schools  remain 
relatively  high.  As  providers  of  these  services  have  difficulties  filling  vacancies,  the 
workload  and  working  conditions  for  the  existing  staff  is  deteriorating  further.  To 
boost  competitiveness  and  growth,  raising  labour  supply,  including  by  further 
stimulating labour market participation, notably of older and workers with lower levels 
of skills, attracting workers from non-EU countries, and strengthening the integration 
of migrant workers into the labour market and society are key. 

18 

Time series - European Commission (europa.eu) 

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(36)  Fossil  fuels,  a  large  proportion  of  which  are  imported,  continue  to  constitute  a 
significant share of Slovenia’s energy mix (58%), therefore also contributing to higher 
and  more  volatile  prices,  in  turn  affecting  competitiveness.  Concentrated  efforts  are 
required to accelerate the roll-out of renewable energy sources across all sectors, the 
uptake of energy storage, and the implementation of energy efficiency measures. 

(37)  Permitting and administrative procedures for grid-scale renewable energy installations, 
in  particular  wind  installations,  remain  a  major  bottleneck,  due  to  the  complex  and 
lengthy  environmental  and  municipal-level  procedures,  lasting  up  to  several  years. 
Slovenia  has  recorded  no  increase  in  wind  power  capacity in  the  last  decade  despite 
the  existing  potential.  Designating  areas  for  wind  installations  with  detailed  spatial 
planning rules  could  help unlock the potential. Furthermore,  capacity building  in  the 
form  of  trainings  and  additional  resources  available  to  local  authorities  could  help 
accelerate deployment of renewables. 

(38)  Grid  constraints,  particularly  at  distribution  level,  prevent  an  increasing  share  of 
renewable  energy  installations  from  being  connected  (over  20%  of  requests  at  low-
voltage level being rejected), highlighting the need for reinforcement. While measures 
to strengthen the grid have continued to be implemented through the RRF, including 
under  the  REPowerEU  chapter,  Slovenia  needs  to  increase  its  efforts,  including  by 
introducing smart grid components. While the energy efficiency measures, especially 
the  renovation  of  buildings,  have  continued  to  be  implemented  through  the  national 
financing  framework  and  different  EU  funds,  including  the  RRF,  Slovenia  needs  to 
increase  its  efforts,  in  particular  to  reach  long-term  renovation  strategy  targets  to 
reduce the energy consumption of buildings by 17% by 2030 compared to 2020. 

(39)  The  uptake  of  sustainable  transport  is  still  lagging  behind  the  rest  of  the  EU  with 
dependence  on  private  cars  remaining  very  high.  The  electrification  of  transport  is 
especially low with the share of electricity in final energy consumption in the transport 
sector remaining negligible at 1.3%. While at EU level greenhouse gas emissions from 
road transport decreased between 2005 and 2023, in  Slovenia they visibly increased. 
Many large railway and e-mobility investments under the recovery and resilience plan 
are  in  progress.  However,  there  is  still  room  to  further  increase  the  uptake  of  public 
transport. 

(40)  Slovenia  is  highly  vulnerable  to  climate-related  risks,  particularly  floods,  and  has 
suffered  multiple  extreme  weather  events  in  recent  years  (such  as  wildfires  in  2022 
and  windstorms  with  heavy  floods  in  2023).  This  has  a  negative  impact  on  the 
country’s  economy  and  society with  the  economic loss per person in  Slovenia being 
the  highest  in  the  EU.  Despite  efforts  to  strengthen  climate  resilience,  challenges 
remain, particularly those concerning the implementation of flood protection measures 
and nature-based solutions, and environmental governance. Furthermore, the pressure 
on  water  resources  is  growing  and  the  state  of  nature  and  ecosystems  continues  to 
deteriorate, further weakening Slovenia’s climate and water resilience and highlighting 
the existing financing gaps in this regard. 

(41) 

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

the  economic  policy  of 

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euro-area recommendation on resilience, and recommendation (1) helps implement the 
euro-area  recommendation  on  macroeconomic  and  financial  stability  set  out  in  the 
2025 Recommendation. 

HEREBY RECOMMENDS that Slovenia 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, while making use of 
the  allowance  under  the  national  escape  clause  for  higher  defence  expenditure. 
Ensure  the  fiscal  sustainability  of  social  protection  and  rebalance  tax  revenues 
towards more growth-friendly and sustainable sources. Improve the quality of public 
finances by implementing spending reviews. 

In  view  of  the  applicable  deadlines  for  the  timely  completion  of  reforms  and 
investments  under  Regulation  (EU)  2021/241,  accelerate  the  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. 

Simplify  regulation,  improve  regulatory  tools  and  reduce  administrative  burden  on 
businesses,  including  in  certain  services  and  regulated  professions,  as  well  as 
reducing  barriers  to  services  trade.  Strengthen  competitiveness  by  promoting 
business  dynamism  and  the  creation  of  high-growth  companies  by  improving  the 
conditions  for  equity 
investment,  for 
institutional  investors,  as  well  as  for  investments  in  research,  development  and 
innovation. 

including  venture  capital 

investment, 

Accelerate  the  roll-out  of  renewables  and  energy  storage  by  streamlining  and 
expediting  administrative  and  permitting  procedures  by  means  of  designating  areas 
for wind power installations and by  stepping up  capacity building  for permitting  at 
local  level.  Strengthen  the  electricity  grid  infrastructure  at  distribution  level  and 
introduce  smart  grid  components.  In  addition,  accelerate  the  implementation  of 
energy  efficiency  measures,  particularly  in  the  building  sector.  Promote  the 
electrification of the transport sector and focus investments on sustainable transport, 
particularly  rail.  Further  strengthen  climate  and  water  resilience  by  improving  the 
environmental  and  climate  adaptation  governance  and  accelerating 
the 
implementation of targeted climate adaptation and environmental measures. 

Address labour shortages by stepping up the provision and acquisition of skills and 
competences,  including  basic  skills  among  pupils  and  those  relevant  for  the  green 
and digital transition. Boost lifelong learning and training, especially for low-skilled 
and older workers. Raise Slovenia’s attractiveness for foreign workers with advanced 
skills. Improve working conditions, particularly in the care and teaching sectors. 

Done at Brussels, 

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For the Council 
The President 

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