Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Slovenia
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Slovenia, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, investment, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 3.6.2026  COM(2026) 224 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Slovenia {SWD(2026) 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  1466/97  (1),  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: 

(1) 

Regulation  (EU)  2024/1263  specifies  the  objectives  of  the  economic  governance 
framework,  which  aims  at  promoting  sound  and  sustainable  public  finances, 
sustainable  and  inclusive  growth  and  resilience  through  reforms  and  investments,  as 
well  as  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 
Treaty  on  the  Functioning  of  the  European  Union  (TFEU).  The  European  Semester 
includes, in  particular, the formulation and the surveillance of the implementation  of 
country-specific recommendations. 

(2) 

On  16 July 2025,  the  Commission  adopted  its  proposal  for  a  regulation  establishing 
the European Fund for economic, social and territorial cohesion, agriculture and rural, 
fisheries and maritime, prosperity and security for the period 2028-2034 and amending 
Regulation (EU) 2023/955 and Regulation (EU, Euratom) 2024/2509 (2). The proposal 

1 

2 

EN 

Regulation 

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 
ELI: 
http://data.europa.eu/eli/reg/2024/1263/oj) 
Proposal for a Regulation of the European Parliament and of the Council establishing the European Fund for 
economic,  social  and  territorial  cohesion,  agriculture  and  rural,  fisheries  and  maritime,  prosperity  and 
security for the period 2028-2034 and amending Regulation (EU) 2023/955 and Regulation (EU, Euratom) 

(EC)  No 

2024/1263, 

30.4.2024, 

1466/97 

(OJ 

L, 

1 

  EN 

 
 
(3) 

(4) 

(5) 

(6) 

aims to increase the effectiveness of Union funding by reducing the fragmentation of 
the  financial  architecture  and  to  support  Member  States  in  the  coordination  of  their 
economic policy in line with Article 175 (TFEU) .  

On  25 November 2025,  the  Commission  adopted  an  opinion  on  the  2026  draft 
budgetary  plan  of  Slovenia.  On  the  same  date,  on  the  basis  of  Regulation  (EU)  No 
1176/2011,  the  Commission  adopted  the  2026  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,  a  recommendation  for  a 
Council recommendation on human capital in the European Union, and a proposal for 
the  2026  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 area (3) 
on  21 April 2026  and  the  Joint  Employment  Report,  and  the  Recommendation  on 
human capital on 9 March 2026.  

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic  framework  that  aims  to  boost  the  Union’s  global  competitiveness  over  the 
next  five  years.  It  identifies  the  three  transformational  imperatives  of  innovation, 
decarbonisation  and  competitiveness,  and  security  as  critical  pillars  for  sustainable 
economic  growth.  The  European  Semester  is  aligned  with  the  Competitiveness 
Compass,  ensuring  that  Member  States’  economic  policies  are  consistent  with  the 
Commission’s  strategic  objectives,  creating  a  unified  approach 
to  economic 
governance that fosters sustainable growth, innovation and resilience across the Union. 

In  2026,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  final  stage  of  Recovery  and  Resilience  Facility  (RRF) 
implementation (4). Recovery and resilience plans (RRPs), along with cohesion policy 
funding, have been essential for delivering on the policy priorities under the European 
Semester, as the plans were required to effectively address all or a significant subset of 
challenges identified in the relevant country-specific recommendations issued in recent 
cycles, and programmes funded by the European cohesion policy were required to take 
country-specific recommendations into account. As the RRF approaches the end of its 
lifetime,  it  remains  essential  to  sustain  the  reforms  and  investments  supported  and 
implemented  under  the  RRF  in  particular  those  that  contribute  to  addressing 
challenges identified in the country specific recommendations.  

On  3 June 2026,  the  Commission  published  the  2026  country  report  for  Slovenia.  It 
assessed  Slovenia’s  progress 
relevant  country-specific 
in  addressing 
recommendations and took stock of Slovenia’s implementation of RRP. On the basis 
of that 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.  

the 

3 
4 

2024/2509 - COM(2025) 565 final. The proposed Regulation is currently the subject of negotiations with the 
co-legislators. 
OJ C, C/2026/2434, 28.4.2026, ELI: http://data.europa.eu/eli/C/2026/2434/oj  
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12 February 2021 
(OJ  L  57,  18.2.2021,  p.  17,  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj). 

the  Recovery  and  Resilience  Facility 

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(7) 

(8) 

(9) 

On  21  January  2025,  the  Council,  upon  the  assessment  and  recommendation  of  the 
Commission, adopted a Recommendation endorsing the national medium-term fiscal-
structural  plan  of  Slovenia5.  The  plan  covers  the  period  from  2025  until  2028  and 
presents  a  fiscal  adjustment  spread  over  four  years.  The  Council  recommended  the 
following  maximum  growth  rates  of  net  expenditure:  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 the base year of 2023 of 12.1% in 2025, 17.0% 
in 2026, 21.8% in 2027 and 26.6% in 2028. 

from 

recommendation 

Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  has  invited  Member 
States  to  request  the  activation  of  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 8 July 2025 
the  Council,  upon  a 
the  Commission,  adopted  a 
Recommendation  allowing  Slovenia  to  deviate  from  the  recommended  maximum 
growth  rates  of  net  expenditure6.  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.  
On 30 April 2026, Slovenia submitted its 2026 Annual Progress Report7 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  Slovenia’s  biannual  reporting  on  the  progress  made  in 
implementing  its  recovery  and  resilience  plan  in  accordance  with  Article  27  of 
Regulation (EU) 2021/241. 

(10)  Real  GDP  growth  in  2025  was  1.1%  and  HICP  inflation  stood  at  2.5%.  The 
Commission  Spring  2026  Forecast  projects  real  GDP  to  grow  by  1.9%  in  2026  and 
2.3% in 2027, and HICP inflation to stand at 3.5% in 2026 and 2.5% in 2027. 
(11)  Based on data provided by Eurostat8, Slovenia’s general government deficit increased 
from  0.9%  of  GDP  in  2024  to  2.5%  of  GDP  in  2025.  The  increase  in  the  deficit  in 
2025 mainly  reflects  a permanent  rise in  current  expenditures, a record-high  level  of 
public  investment  and  a  cyclical  slowdown  in  revenues.  Based  on  policy  measures 
known  by  the  cut-off  date  of  the  forecast,  the  Commission  Spring  2026  Forecast 
projects a deficit of 3.3% of GDP in 2026 and 3.5% of GDP in 2027. The increase in 
2026  mainly  reflects  an  increase  in  current  expenditure  driven  by  government 
intermediate consumption, social benefits and public wages. The increase of the deficit 
in 2027 mainly reflects the expiry of EU transfers from RRF grants against a sustained 
high level of public investments. 

5  Council  Recommendation  of 21 January 2025  endorsing  the  national  medium-term  fiscal-structural  plan  of 

Slovenia (OJ C, C/2025/640, 10.02.2025, ELI: https://eur-lex.europa.eu/eli/C/2025/640/oj). 

6  Council Recommendation allowing Slovenia to deviate from the maximum growth rates of net expenditure as 
set  by  the  Council  under  Regulation  (EU)  2024/1263  (Activation  of  the  national  escape  clause)  (OJ  C, 
C/2025/3973, 20 08 2025, ELI: https://eur-lex.europa.eu/eli/C/2025/3973/oj ). 

7  The  2026  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  

8  Eurostat-Euro Indicators, 22 04 2026. 

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(12)  On  11 May 2026,  after  the  cut-off  date  of  the  Commission  Spring  2026  Forecast, 
additional deficit-increasing measures were adopted by the National Assembly, in the 
area  of  personal  income  tax,  social  contributions,  taxes  on  products  and  social 
transfers,  which  are  estimated  by  the  Commission  to  have  a  total  budgetary  cost 
between 0.5% and 1.0% of GDP in 2026. Most of these measures are expected to be 
not temporary and they would increase the deficit in 2026 and beyond. In response, the 
outgoing  government  is  preparing  a  number  of  savings  measures.  Given  the 
uncertainty around their size and adoption, the impact of these more recent measures is 
not considered at this stage. 

(13)  Based  on  the  Commission’s  estimates,  the  fiscal  stance9,  which  includes  both 
nationally and EU financed expenditure, was expansionary, by 1.6% of GDP, in 2025. 
It  is  projected to  be expansionary, by 1.3% of GDP,  in  2026, and contractionary, by 
0.7% of GDP, in 2027. 

(14)  Based on data provided by Eurostat10, Slovenia’s general government debt decreased 
from  66.4%  of  GDP  at  the  end  of  2024  to  65.7%  of  GDP  at  the  end  of  2025.  The 
decrease in the debt ratio in 2025 mainly reflects a debt-reducing interest-growth-rate 
differential.  Based  on  policy  measures  known  at  the  cut-off  date  of  the  forecast,  the 
Commission Spring 2026 Forecast projects the debt-to-GDP ratio to decrease to 64.9% 
by the end of 2026 and to further decrease to 65.1% by the end of 2027. The decrease 
in  the  debt  ratio  in  2026  mainly  reflects  a  debt-reducing  interest-growth-rate 
differential and a debt-reducing stock-flow adjustment. 

(15)  Based  on  Eurostat  data11,  total  general  government  defence  expenditure  in  Slovenia 
amounted  to  1.3%  of  GDP  in  2025,  corresponding  to  an  increase  of  0.2  percentage 
points  of  GDP  compared  to  the  reference  year  2021.  According  to  the  Commission 
Spring  2026  Forecast,  it  is  projected  at  1.6%  of  GDP  in  2026,  corresponding  to  an 
increase of 0.5 percentage points of GDP compared to 2021. 

(16)  The  Union  continues  to  face  risks  of  energy  supply  disruptions  and  elevated  price 
volatility,  exacerbated  by  geopolitical  tensions  which  affect  global  oil  and  gas 
markets.  Experience  from  the  2022–2023  energy  crisis  has  shown  that  broad  and 
untargeted  measures  entail  large  fiscal  costs  and  are  socially  and  economically 
inefficient.  Since  the  outbreak  of  the  war  in  the  Middle  East  in  February  2026, 
Slovenia adopted fiscal  policy measures to mitigate the impact of high energy prices 
on households and firms12. These include an untargeted reduction in excise duties on 
diesel,  gasoline  and  heating  oil  assumed  to  last  until  the  end  of  the  year  and  an 
untargeted  reduction  of  environmental  tax  on  carbon  dioxide  on  diesel,  gasoline  and 
heating  oil  set  to  expire  in  June  2026.  According  to  the  Commission  Spring  2026 
Forecast, the fiscal cost of these measures is projected to amount to 0.2% of GDP in 
2026. According to Commission estimates, if these measures were to remain in force 
until end-2026, their fiscal cost would amount to 0.3% of GDP in 2026. 

9  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. 

10  Eurostat-Euro Indicators, 22 04 2026. 
11  Eurostat, government expenditure by classification of functions of government (COFOG). 
12  This reflects the situation at the cut-off date of the Commission Spring 2026 Forecast (4 May 2026). 

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(17)  Based on the Commission’s calculations, net expenditure in Slovenia grew by 8.8% in 
2025  and  13.2%  cumulatively  over  2024  and  2025.  The  net  expenditure  growth  in 
2025 is above the recommended maximum growth rate, corresponding to a deviation 
of  1.4%  of  GDP  in  annual  terms.  When  considering  2024  and  2025  together,  the 
cumulative growth rate of net expenditure is also above the recommended maximum 
growth rate, corresponding to a deviation of 0.5% of GDP in cumulative terms. Taking 
into  account  the  flexibility  for  higher  defence  spending  provided  for  by  the  national 
escape  clause,  considering  2024  and  2025  together,  the  cumulative  deviation  of  net 
expenditure amounts to marginally above 0.3% of GDP. 

(18)  Based  on  the  Commission’s  calculations,  net  expenditure  in  Slovenia  is  projected  to 
grow  by  7.2%  in  2026,  and  21.3%  cumulatively  over  2024,  2025  and  2026.  The 
projected  net  expenditure  growth  in  2026  is  above  the  recommended  maximum 
growth  rate,  corresponding  to  a  deviation  of  1.2%  of  GDP  in  annual  terms.  When 
considering 2024, 2025 and 2026 together, the projected cumulative growth rate of net 
expenditure is also above the recommended maximum growth rate, corresponding to a 
deviation of 1.7% of GDP in cumulative terms. Taking into account the flexibility for 
higher defence spending provided for by the national escape clause, considering 2024, 
2025  and  2026  together,  the  projected  cumulative  deviation  of  net  expenditure 
amounts to 1.2% of GDP.  

(19)  On 3 June 2026, the Commission adopted a report under Article 126(3) TFEU13. That 
report  assessed  the  situation  of  Slovenia  vis-à-vis  the  deficit  criterion,  as  its  planned 
general  government  deficit  in  2026  exceeds  the  reference  value  of  3%  of  GDP.  The 
report  concluded  that  the  deficit  criterion  is  not  fulfilled  by  Slovenia.  At  the  same 
time, the Council has activated the national escape clause for Slovenia and the deficit 
in  excess  of  the  reference  value  is  fully  explained  by  the  increase  in  defence 
expenditure  since  2021,  based  on  the  Commission  Spring  2026  Forecast.  However, 
while the Commission is of the view that there is no case to open an excessive deficit 
procedure  for  Slovenia  at  this  stage,  significant  uncertainty  remains  over  the  fiscal 
outlook for 2026 (cf. recital 12). In the absence of sufficient corrective measures being 
taken in a credible and timely manner, this may lead to the opening of the excessive 
deficit  procedure  for  Slovenia  in  autumn.  In  light  of  this  and  after  considering  the 
opinion of the Economic and Financial Committee as established under Article 126(4) 
TFEU,  the  Commission  has  not  at  this  stage  proposed  to  open  an  excessive  deficit 
procedure. 

(20)  Slovenia’s tax mix relies heavily on labour taxation, which accounted for 52% of total 
tax  revenues  in  2023.  In  the  context  of  a  rapidly  ageing  population  and  a  shrinking 
working-age  workforce,  Slovenia's  heavy  reliance  on  labour  taxes  poses  a  structural 
risk  as  a  high  tax  wedge  can  discourage  job  creation  and  have  a  negative  effect  on 
labour  supply  and  competitiveness.  Currently,  Slovenia  makes  limited  use  of  less-
distortive revenue sources; recurrent property taxes generate revenues well below the 
EU  average  and  reforms  in  this  area  have  not  been  put  forward.  Slovenia  lacks  a 
framework  to  evaluate  the  economic  efficiency  or  necessity  of  the  extensive 
recurrence  of  tax  expenditures  amounting  to  5.2%  of  GDP  in  2023.  A  systematic 
review of these expenditures and adjustments of property taxation would broaden the 
tax base and generate additional fiscal  space. Rebalancing  the tax mix towards more 

13  Report from the Commission, prepared in accordance with Article 126(3) of the Treaty on the Functioning of 

the European Union, 3.06.2026, COM(2026)302 final. 

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growth  friendly  and  sustainable  sources  mitigates  structural  risks  and  supports  fiscal 
sustainability. 

(21)  Enhancing the efficiency of public spending is required to address rising ageing costs 
and  improve  quality  of  public  finances.  While  Slovenia  has  experience  in  producing 
expenditure analyses, these are not yet systematically integrated into the annual budget 
process.  Institutionalising  regular  spending  reviews  in  the  largest  expenditure  areas 
notably social protection (17.1% of GDP), healthcare (8%), economic affairs (5.7%), 
and  education  (5.5%)  would  facilitate  a  more  effective  reallocation  of  resources  and 
increase  accountability.  Despite  an  increase  in  social  transfers,  the  rate  of  people  at 
risk  of  poverty  or  social  exclusion  has  risen  for  the  fourth  consecutive  year,  notably 
reflecting  an  increase  in  at  risk  of  poverty  rate  among  the  elderly  population, 
indicating  that  the  system  is  failing  to  reach  the  most  vulnerable.  Efficiency  gains 
could be achieved by better targeting social benefits, harmonising fragmented family 
support  and  addressing  sick  leave  benefits.  Demographic  decline,  ageing  population 
and  uneven  access  to  quality  essential  services  (healthcare  and  education)  heighten 
territorial  disparities,  impacting  in  particular  rural  areas.  Additionally,  while  public 
investments remain high, improving their composition and planning via strengthened 
coordination  between  national  and  local  authorities  is  necessary  to  ensure  fiscal 
sustainability and support growth potential. 

(22)  The implementation  of cohesion  policy programmes,  which encompass support from 
the  European  Regional  Development  Fund  (ERDF),  the  Just  Transition  Fund  (JTF), 
the  European  Social  Fund  Plus  (ESF+)  and  the  Cohesion  Fund  (CF)  in  Slovenia,  is 
above the average pace at EU level, both in terms of project selection and payments. It 
is important to keep current momentum, while maximising the impact of investments 
on the ground. Slovenia is already taking action under its cohesion policy programmes 
to  boost  competitiveness  and  growth.  Nevertheless,  some  areas  may  require  further 
strengthening  in  implementation,  including  those  relating  to  skills,  research  and 
innovation,  climate  change  adaptation,  water  management,  and  provision  of  local 
services. It is essential to ensure that the new investments identified by Slovenia in its 
mid-term  review  of  the  cohesion  policy  funds,  notably  those  linked  to  the  five 
priorities identified in the Mid-Term Review Regulation (14), are deployed rapidly and 
effectively. 

(23)  Slovenia  faces  several  challenges  related  to  the  energy  sector,  sustainable  transport, 
climate resilience and environment, business environment, competitiveness and labour 
shortages.  

(24)  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%  for  all  companies  and  by  at  least  35%  for 
SMEs. It has also created 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. While some progress has been achieved, 
the need for stronger cooperation and coordination among the national, regional, and 
local levels remains. The complexity of administrative procedures is reported to be a 

14 

Regulation  (EU)  2025/1914  of  the  European  Parliament  and  of  the  Council  of  18 September 2025 
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. 

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constraint  by  [67]%  of  companies  when  doing  business  in  Slovenia  (15).  Structural 
challenges  continue  to  weigh  on  Slovenia’s  business  environment,  with  labour  and 
skills shortages, regulatory and tax burdens acting as major constraints on investment 
and  growth.  Permitting  processes  remain  particularly  burdensome,  with  lengthy 
timelines  for  construction  and  environmental  permits,  the  need  to  manage  the  legal 
formalities  physically,  and  limited  interoperability  of  digital  registries.  Regulatory 
barriers  to  the  Single  Market,  affecting  especially  cross-border  service  trade  and 
certain regulated professions, persist and progress with addressing them has remained 
limited.  In  this  regard,  increasing  the  scope,  ambition  and  pace  of  regulatory 
simplification and administrative modernisation may improve quality and lower prices 
as well as support growth in the longer term. 

target 

(1.25%).  High-value-added  activities  and 

(25)  Slovenia’s  public-private  links  in  research  and  innovation  (R&I)  in  terms  of  co-
publications  remain  slightly  above  the  EU  average,  but  the  country  struggles  to  turn 
excellent  research into successful products,  mainly because knowledge transfer lacks 
continuity  and  insufficient  financial  support  for  the  R&D  activity.  While  business 
spending in R&D in Slovenia stand at the EU average, it has fallen for three years to 
1.5% of GDP, particularly among SMEs. Moreover, Slovenia’s public expenditure on 
R&D continues to lag behind the EU average (0.64% vs 0.72% of GDP) as well as the 
national 
remain 
concentrated in the capital region, while other regions face lower R&D investment and 
weaker  productivity  outcomes,  constraining  competitiveness  and  innovation-driven 
growth.  While  some  positive  initiatives  are  underway,  including  strategic  funding 
projects and targeted support for high-potential proposals, the effective deployment of 
alternative  investment  instruments,  especially  for  startups,  in  important  to  fully 
leverage  Slovenia's  innovation  capacity  and  achieve  its  full  realisation.  Slovenia  has 
made  efforts  to  improve  the  governance  of  the  R&I  by  consolidating  most  R&I 
policies into one ministry, updating the Act on Research, Development and Innovation 
Activities  and  creating  horizontal  coordination  mechanisms  to  streamline  policy 
initiatives,  which  were  part  of  the  Slovenian  recovery  and  resilience  plan  (RRP). 
Although these reforms have been implemented, their impact is not yet tangible, and 
the  mechanisms  may  require  adding  a  monitoring  component  to  track  progress  and 
possible  reinforcement.  Furthermore,  a  more  systematic  approach  to  knowledge 
transfer is not yet in place, which may hinder the conversion of high-quality academic 
research into commercially viable products. 

innovation 

(26)  Slovenian  businesses  predominantly  rely  on  bank  financing  due  to  the  country's  less 
developed  capital  market  and limited participation of domestic institutional  investors 
in  financing  innovative  companies  and  start-ups.  The  private  equity  and  venture 
capital  sectors  are  significantly  less  mature  than  their  EU  counterparts,  with  assets 
amounting to only 0.04% and 0.01% of GDP in 2024, respectively, compared to EU 
averages  of  0.46%  and  0.06%  of  GDP.  Furthermore,  Slovenian  households  tend  to 
hold  a  large  proportion  of  their  financial  assets  in  cash  and  deposits,  rather  than 
investing  in  market-based  financial  instruments.  The  pension  fund  sector  has  a  low 
level of assets, with only 7.1% of GDP in 2024, the third-lowest level in the EU. The 
non-bank financing market in Slovenia needs to expand and diversify to increase the 
long-term 
availability  of  risk  capital  and  boost 
competitiveness. Development of equity funding and venture capital lacks support by 

investment  and 

innovative 

15 

‘Businesses' attitudes towards corruption in the EU’ Flash Report, Eurobarometer Report 2025. 

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equity  investment  from  pension  providers,  which  can  contribute  to  an  increase  in 
supplementary pensions and is important for growth of innovative start-ups. 

(27)  Fossil  fuels,  a  large  proportion  of  which  are  imported,  continue  to  constitute  a 
significant  share  of  Slovenia’s  energy  mix  (58%),  contributing  to  higher  and  more 
volatile prices, in turn affecting competitiveness. Furthermore, Slovenia had to rely on 
a  statistical  transfer  in  order  to  meet  its  national  renewable  energy  target  (25%). 
Despite  some  progress,  further  efforts  are  required  to  accelerate  the  roll-out  of 
renewable  energy  sources  across  all  sectors,  including  the  uptake  of  energy  storage, 
and  the  implementation  of  energy  efficiency  measures.  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, 
increased efforts by Slovenia will help to reach long-term renovation strategy targets 
to reduce the energy consumption of buildings. 

(28)  Permitting and administrative procedures for grid-scale renewable energy installations, 
including wind installations, continue to constitute a major bottleneck for renewables 
in  Slovenia.  While  there  has  been  progress  in  reforming  the  regulatory  framework, 
environmental  and  municipal-level  procedures  can  still  last  up  to  several  years. 
Slovenia has recorded no increase in wind power capacity in more than a decade, and 
deployment of new solar photovoltaic capacity has slowed down significantly in 2025 
compared  to  the  previous  three  years.  Designating  acceleration  areas  for  renewable 
energy  installations,  where  permitting  and  administrative  procedures  are  effectively 
simplified and shortened, could help expedite deployment significantly. Furthermore, 
capacity  building  in  the  form  of  trainings  and  additional  resources  available  to  local 
authorities  could  further  accelerate  the  processing  of  requests,  as  well  as  overcome 
local opposition. At the same time, regions undergoing coal phase-out face significant 
just transition challenges related to economic diversification, workforce reskilling and 
the development of clean energy infrastructure. 

(29)  Grid constraints, particularly at distribution level, have  started to ease, in  part due to 
the  implementation  of  RRF  investments.  However,  sustaining  the  continuous 
integration  of  decentralised  renewables,  while  also  meeting  the  rising  electricity 
demand  from  electrification,  will  require  a  substantial  increase  in  grid  investments, 
including in digitalisation. 

(30)  The  uptake  of  sustainable  transport  is  still  lagging  behind  the  rest  of  the  EU  with 
dependence on private cars remaining very high. Road transport remains the dominant 
source  of  greenhouse  gas  emissions,  air  pollution  and  energy  consumption  in  the 
sector. These values are all above the EU average. Many large railway and e-mobility 
investments under the Recovery and Resilience Plan, Connecting Europe Facility and 
the cohesion policy programme are in progress. However, there is still a pertinent need 
to  address  sustainable  passenger  transport  supply  and  uptake  and  to  proceed  with 
investments into resilient railway infrastructure along the TEN-T corridors, including 
cross boarder sections and preparing high-speed railway lines. 

(31)  Slovenia  is  highly  vulnerable  and  frequently  exposed  to  climate-related  risks, 
particularly  to  floods,  heatwaves,  droughts  and  forest  fires,  which  are  unevenly 
distributed  across  regions  and  have  a  negative  impact  on  the  country's  economy  and 
society.  Despite  the  increasing  risks,  Slovenia  still  has  one  of  the  lowest  insurance 
coverage rates against weather and climate related extreme events in the EU, leaving 
gaps in financial protection and pointing to needs in expanding the use and uptake of 
climate insurance mechanisms. In 2025, Slovenia adopted a new Climate Act, which 

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is  still 

lagging  at  national,  regional  and 

significantly  strengthened  the  climate  adaptation  governance  framework.  However, 
this  is  only  the  beginning  of  the  process,  and  the  effective  implementation  of  the 
related  policies 
level.  The 
implementation  of  flood  protection  measures  is  delayed,  and  nature-based  solutions 
have  not  been  systematically  deployed  across  all  sectors  yet.  Despite  efforts, 
challenges  also  remain  in  terms  of  modernising  water  infrastructure,  restoring 
fragmented  freshwater  ecosystems,  reducing  water  pollution  and  addressing  the 
deteriorating  status  of  Slovenia’s  nature  and  ecosystems,  which  continues  to  weaken 
the country’s climate and water resilience. 

local 

(32)  Persistent  labour  shortages  and  skills  mismatches  undermine  investment  and 
competitiveness  in  Slovenia.  Around  half  of  companies  report  staff  shortages,  with 
vacancy rates above the EU average. Demographic change, working conditions, skills 
gaps,  and  mismatches  exacerbate  these  shortages,  particularly  in  education,  the  care 
sector,  ICT,  construction,  and  scientific  and  technical  professions,  requiring  skills  in 
science,  technology,  engineering  and  mathematics  (STEM)  fields.  Slovenia  faces 
significant  digital  skills  gaps,  with  63.9%  of  firms  reporting  ICT  skill  shortages  and 
adult  digital  proficiency  lagging  behind  the  EU  average.  This  hinders  business 
digitalization and poses a risk to  human capital development.  Furthermore, the latest 
OECD PISA survey on students’ skills revealed a concerning declining trend in basic 
skills  levels  and  the  International  Computer  and  Information  Literacy  Study  (ICILS) 
study showed low digital literacy. Emerging green skills shortages will further strain 
the labour market, with green job projected to account for 40% of all vacancies. To fill 
labour  gaps,  Slovenia  relies  on  foreign  workers  which  represented  16%  of  the 
country's  workforce  and  projected  to  reach  26%  by  2030.  But  Slovenia  faces 
challenges  in  attracting  highly  qualified  workers  compared  to  the  other  EU  Member 
States,  potentially  due  to  factors  such  as  income  levels,  low  digitalisation  and 
labour  migration, 
workplace 
difficulties  in  qualification  recognition  and  social  inclusion  remain  a  barrier  to 
attracting, recruiting and retaining talent. Moreover, to adjust to structural changes in 
the society, it will be essential to further align the education system with labour market 
needs, make full use of skilled labour by providing policy tools to support job-to-job 
transitions, including older and low skilled workers and strengthening the integration 
of migrant workers into the labour market and society. 

inclusion16.  Slow  administrative  procedures  for 

(33)  While  more  recent  Labour  force  survey  (LFS)  data  suggest  some  progress  between 
2022 and 2024, adult participation in training remains low, significantly below the EU 
average (Adult Education Survey 2022,  SI: 26.5%, EU: 39.5%), and also well below 
Slovenia’s  2030  national  target  of  60%.  It  is  crucial  to  extend  lifelong  learning 
and training  to  the  whole  adult  population,  including  among  vulnerable  groups.  The 
percentage  of  Slovenian  adults  with  at  least  basic  digital  skills  further  decreased  in 
2025  to  46.5%  (EU  60.4%)  and  is  slowing  the  digital  transition.  Slovenia  has 
committed to developing a national wide Skill’s Action Plan; however, the preparation 
remains at an early stage, making it is still premature to assess its potential impact. 

(34)  The systematic, meaningful and timely 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 Union’s funding 
instruments, as well as in the context of the European Semester. 

16 

See IMAD, Quality of Life Report – Development Report 2025 

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(35)  As a part of the Recovery and Resilience Plans, Slovenia’s public sector wage reform 
entered into force in January 2025, gradually rising public sector wages, including for 
healthcare,  long-term  care  workers  and  teachers.  Alongside  the  wage  reform,  a  new 
winter allowance has been introduced in October 2025, and statutory minimum wage 
has  been  increased  by  16%  in  January 2026.  In  2024,  Slovenia  has  also  introduced 
measures  to  improve  staffing  and  working  conditions  in  healthcare,  long-term  and 
social care such as scholarships for health and social work professions, facilitating the 
recognition  of  professional  qualifications  for  foreign  healthcare  professionals,  and  a 
pilot internship programme for nurses (2024-2026) but most of these measures are still 
to be fully implemented. In this regard, labour and skills shortages persist, with about 
80% of employers in these sectors report difficulties finding workers, hindering access 
and  the  effective  delivery  of  healthcare  and  long-term  care  services,  including  in 
depopulating  regions.  Slovenia  has  already  a  low  share  of  health  and  social  care 
workers in total employment compared to the OECD average (7% vs 9.3%, 2021 data) 
and fewer nurses and doctors per inhabitant than the EU average. Working conditions 
in  the  healthcare  and  long-term  care  sector  are  challenging  due  to  high  workload  of 
current  personnel,  including  longer  working  hours,  shifts  and  night  work,  adding  to 
higher  physical  and  emotional  strain  and  more  frequent  sick  leaves  (17).  Without 
urgent policy action the situation is  expected to  worsen due to an ageing population, 
staff  retirements  and  the  outflow  of  care  workers  to  foreign  countries  or  other 
professions. The teaching profession is also facing a shortage, largely due to the low 
prestige of the profession as well as administrative burden. 

(36) 

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  2026  the  Council  recommended  that  the  euro-area  Member  States  take 
action, including through their RRPs, to implement the 2026 Recommendation on the 
economic  policy  of  the  euro  area.  For  Slovenia,  the  recommendation  (1)  helps 
implement  the  first  the  second  and  the  third  recommendations  on  the  euro  area, 
recommendation  (2)  helps  implement  the  fourth  recommendation  on  the  euro  area, 
recommendation (3) helps implement the seventh, eighth and ninth recommendations 
on  the  euro  area,  recommendation  (4)  helps  implement  the  seventh  recommendation 
on 
the  fifth 
recommendation on the euro area. 

the  recommendation  (5)  helps 

the  euro  area  and 

implement 

(37) 

In light of the crucial role of human capital in enhancing the Union’s competitiveness 
and  strategic  autonomy,  in  2026  the  Council  recommended  that  Member  States  take 
action  to  urgently  address  human  capital  related  structural  challenges  in  the  areas  of 
skills  and  education,  which  hamper  competitiveness.  The  2026  country-specific 
recommendations  addressed  to  Slovenia  can  contribute  to  the  implementation  of  the 
Council Recommendation on human capital in the Union. 

HEREBY RECOMMENDS that Slovenia take action in 2026 and 2027 to:  

1. 

17 

In  view  of  the  deviation  recorded  by  2025  and  the  material  deviation  projected  for 
2026  by  the  Commission  vis-à-vis  the  recommended  net  expenditure  ceiling,  take 
action  to  control  net  expenditure  so  that  it  respects  the  maximum  growth  rates 

According to the Slovenian health Insurance Institute, the average loss of working days per employee 
due  to  sick  leave  in  2022  is  31.20 days.  Final  report  on  Promotion of  long-term  care  occupations  by 
Ministry of health (2024) shows that in long-term care 40% of personnel works more than 41 hours per 
week, with 10% more than 46 hours per week. 

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recommended by the Council on 21 January 2025, while making use of the flexibility 
under the national  escape clause for higher defence expenditure. Reinforce defence 
spending  and  readiness  while  ensuring  spending  efficiency  and  gradually  adapting 
the budget to sustain structurally higher defence spending. Ensure that any measures 
taken to mitigate the impact  of the hike in  energy prices  are temporary, targeted  at 
protecting  vulnerable  households  or  at  addressing  the  needs  of  energy-intensive 
firms, preserve incentives for energy savings  while ensuring that their fiscal cost is 
compatible  with  the  commitments  under  the  EU  fiscal  framework.  Rebalance  tax 
revenues  towards  more  growth-friendly  and  sustainable  sources.  Improve  the 
efficiency of public spending, in particular by implementing spending reviews in the 
largest spending areas. 

Ensure continuity of reforms and investments implemented under the Recovery and 
Resilience  Facility.  Sustain  implementation momentum  under  cohesion  policy 
programmes,  building,  where  appropriate,  on  the  reallocation  to  strategic  priorities 
and flexibilities in the mid-term review of the cohesion policy framework.  

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 outside the capital region. 

including  venture  capital 

investment, 

Accelerate the roll-out of renewables and energy storage, including by streamlining 
and  expediting  administrative  and  permitting  procedures.  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  and  digitalisation  of  the  transport 
sector  and  focus  investments  on  sustainable  transport,  particularly  on  the  TEN-T 
railway  network  and  the  development  of  urban  mobility  and  passenger  transport, 
taking into account regional disparities. Further strengthen climate and water resilience 
by implementing targeted climate adaptation and environmental measures.  

Address  labour  shortages  by  enhancing  the  provision  and  acquisition  of  skills  and 
competences, including basic skills among pupils, by further aligning the education 
system  with  labour  market  needs.  Speed  up  work  permit  and  qualification 
recognition  procedures  for  foreign  workers,  including  those  highly  skilled.  Boost 
lifelong  learning,  upskilling,  and  reskilling  for  adults,  including  on  basic  digital 
skills.  Further  improve  the  non-wage  working  conditions,  particularly  in  the 
healthcare, social and long-term care and teaching sectors. 

2. 

3. 

4. 

5. 

Done at Brussels, 

For the Council 
The President 

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