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

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   EUROPEAN COMMISSION  Brussels, 3.6.2026  COM(2026) 219 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of the Netherlands {SWD(2026) 219 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

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

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 121(2) and Article 148(4) thereof, 

Having regard to Regulation (EU) 2024/1263 of the European Parliament and of the Council 
of  29 April 2024  on  the  effective  coordination  of  economic  policies  and  on  multilateral 
budgetary  surveillance  and  repealing  Council  Regulation  (EC)  No  1466/97  (1),  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 
imbalances (2), 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: 

(1) 

1 

2 

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. 

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). 
Regulation (EU) 1176/2011 of the European Parliament and of the Council of 16 November 2011 on 
(OJ  L  306,  23.11.2011 
the  prevention  and  correction  of  macroeconomic 
ELI: http://data.europa.eu/eli/reg/2011/1176/oj). 

(EC)  No 

2024/1263, 

imbalances 

30.4.2024, 

1466/97 

(OJ 

L, 

EN 

1 

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(2) 

(3) 

(4) 

(5) 

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 (3). The proposal 
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 the Netherlands. On the same date, on the basis of Regulation (EU) 
No 1176/2011, the Commission adopted the 2026 Alert Mechanism Report, in which 
it identified/did not identify the Netherlands as one of the Member States for which an 
in-depth  review  would  be  needed.  The  Commission  also  adopted  a  recommendation 
for  a  Council  recommendation  on  the  economic  policy  of  the  euro  area,  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 (4) 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 (5). 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. 

3 

4  
5 

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) 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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(6) 

(7) 

(8) 

On  3 June 2026,  the  Commission  published  the  2026  country  report  for  the 
Netherlands. It assessed the Netherlands’ progress in addressing the relevant country-
specific  recommendations  and  took  stock  of  the  Netherlands’  implementation  of  the 
RRP.  On  the  basis  of  that  analysis,  the  country  report  identified  the  most  pressing 
challenges  the  Netherlands  is  facing.  It  also  assessed  the  Netherlands’  progress  in 
implementing  the  European  Pillar  of  Social  Rights  and  in  achieving  the  Union 
headline  targets  on  employment,  skills  and  poverty  reduction,  as  well  as  progress  in 
achieving the United Nations Sustainable Development Goals 

The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No  1176/2011  for  the  Netherlands.  The  main  findings  of  the  Commission’s  staff 
assessment of macroeconomic vulnerabilities for  the Netherlands  for the  purposes of 
that Regulation were published on 20 May 2026 (6). On 3 June 2026, the Commission 
concluded that the Netherlands is no longer experiencing macroeconomic imbalances. 
In  particular,  vulnerabilities  related  to  high  levels  of  household  debt,  the  housing 
market,  and  the  large  current  account  surplus  have  been  present  over  the  years  but 
have lessened recently. The large current account surplus dipped somewhat lately and 
part of it is structural, as the Netherlands acts as a key European trade hub and hosts 
many multinational enterprises. In parallel, from a savings-investment perspective, the 
fall  in  the  surplus  reflects  that  domestic  demand  has  been  the  main  contributor  to 
recent real GDP growth and demand has grown faster than in the rest of the euro area, 
albeit from lower levels. The current account surplus is not forecast to grow this year 
or  next.  House  prices  continue  to  grow  visibly  amid  reduced  housing  supply. 
Household debt as a share of GDP fell again in 2025, though more slowly than before, 
as borrowing increased with lower interest rates. The household debt may stabilise in 
the coming years, and the risks related to high household debt are partly mitigated by 
the  prevalence  of  fixed-rate  mortgages.  Some  policy  measures  have  been  taken  to 
increase  housing  supply,  and  the  latest  government  investment  agenda,  including  in 
housing, could help reduce the current account surplus over the medium term. Looking 
ahead,  effectively  increasing  housing  supply  and  tackling  tax  incentives  favouring 
debt-financed  house  buying  could  help  dampen  house  prices  and  reduce  household 
debt in a lasting way while boosting domestic investment would help further narrow 
the  current  account  surplus.  The  European  Semester  will  provide  the  framework  for 
monitoring progress on housing reforms. 

On [date], the Council, upon the assessment and recommendation of the Commission, 
adopted a Recommendation endorsing the national medium-term fiscal-structural plan 
of April 2026 of the Netherlands (7). The plan, submitted pursuant to Article 15(2) of 
Regulation  (EU)  2024/1263,  covers  the  period  from  2026  until  2030  and  presents  a 
fiscal  adjustment  spread  over  four  years.  The  Council  recommended  the  following 
maximum growth rates of net expenditure: 4.7% in 2026, 3.5% in 2027, 3.1% in 2028, 
3.5%  in  2029  and  3.7%  in  2030,  which  correspond  to  the  maximum  cumulative 
growth rates calculated by reference to the base year of 2025 of 4.7% in 2026, 8.4% in 
2027,  11.7%  in  2028,  15.6%  in  2029  and  19.9%  in  2030.  This  recommendation 
superseded  the  Recommendation  of  21 January 2025  (8).  However,  the  maximum 

6 
7 

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SWD(2026) 140 final. 
Council  Recommendation  of  [date]  endorsing  the  national  medium-term  fiscal-structural  plan  of 
April 2026 of the Netherlands (OJ [OJ: please insert relevant OJ references]). 
Council Recommendation of 21 January 2025 setting the net expenditure path of the Netherlands (OJ C, 
C/2025/648, 10.02.2025, ELI: http://data.europa.eu/eli/C/2025/648/oj). 

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(9) 

growth  rates  of  net  expenditure  set  therein  for  the  year  2025,  namely  3.5%  annually 
and  10.4%  cumulatively  by  reference  to  the  base  year  of  2023,  remain  relevant  to 
assess compliance until and including 2025. 

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  (9)  and  this  proposal  was  welcomed  by  the 
European Council of 6 March 2025. Member States may still request the activation of 
the national escape clause at any time until 2028, if they fulfil the criteria set in Article 
26 of Regulation (EU) 2024/1263. 

(10)  On 14 April 2026, the Netherlands submitted its 2026 Annual Progress Report (10) on 
adherence  to  the  recommended  maximum  growth  rates  of  net  expenditure  and  the 
implementation  of  reforms  and  investments  responding  to  the  main  challenges 
identified  in  the  European  Semester  country-specific  recommendations.  The  Annual 
Progress Report also reflects the Netherlands’ biannual reporting on the progress made 
in  implementing  its  recovery  and  resilience  plan  in  accordance  with  Article  27  of 
Regulation (EU) 2021/241. 

(11)  Real  GDP  growth  in  2025  was  1.8%  and  HICP  inflation  stood  at  3.3%.  The 
Commission  Spring  2026  Forecast  projects  real  GDP  to  grow  by  1.0%  in  2026  and 
1.1% in 2027, and HICP inflation to stand at 3.2% in 2026 and 2.5% in 2027. 
(12)  Based on data provided by Eurostat (11), the Netherlands’s general government deficit 
increased  from  0.7%  of  GDP  in  2024  to  1.6%  of  GDP  in  2025.  The  increase  in  the 
deficit in 2025 mainly reflects growing current expenditure and public investment, and 
structural cuts in personal income tax. Based on policy measures known by the cut-off 
date of the forecast, the Commission Spring 2026 Forecast projects a  deficit of 2.5% 
of GDP in 2026 and 1.9.% of GDP in 2027. The increase of the deficit in 2026 mainly 
reflects the temporary effect of a reform of the military pension system that requires a 
transfer  of  approximately  0.7%  of  GDP  from  the  government  to  a  private  pension 
fund. 

(13)  Based  on  the  Commission’s  estimates,  the  fiscal  stance  (12),  which  includes  both 
nationally and EU financed expenditure, was expansionary, by 0.8% of GDP, in 2025. 
It is projected to be broadly neutral in both 2026 and 2027. 

(14)  Based  on  data  provided  by  Eurostat  (13),  the  Netherlands’  general  government  debt 
increased from 43.8% of GDP at the end of 2024 to 44.4% of GDP at the end of 2025. 
Based on policy measures known at the cut-off date of the forecast, the Commission 

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10 

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12 

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Communication  from  the  Commission,  'Accommodating  increased  defence  expenditure  within  the 
Stability and Growth Pact’, Brussels, 19 March 2025, C(2025) 2000 final. 
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  
Eurostat-Euro Indicators, 22 April 2026. 
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-Euro Indicators, 22 April 2026. 

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Spring 2026 Forecast projects the debt-to-GDP ratio to increase to 46.9% by the end 
of  2026  and  to  remain  broadly  stable  at  47.0%  by  the  end  of  2027.  The  increase  in 
2026 mainly reflects loans to TenneT, the electricity transmission system operator of 
the Netherlands, and to EBN, the state energy company. 

(15)  Based  on  Eurostat  data  (14),  total  general  government  defence  expenditure  in  the 
Netherlands amounted to 1.7% of GDP in 2025. According to the Commission Spring 
2026 Forecast, it is projected at 1.9% of GDP in 2026. 

(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,  the 
Netherlands  adopted  fiscal  policy  measures  to  mitigate  the  impact  of  high  energy 
prices on households and firms (15). These include an emergency energy fund targeted 
to support the most vulnerable households with high energy bills during the winter of 
2026-2027,  a  permanent  increase  in  the  tax-free  travel  allowance,  and  targeted 
reductions of the motor vehicle tax rate for delivery vans and trucks for the year 2026. 
According to the Commission Spring 2026 forecast, the fiscal cost of these measures 
is projected to amount to less than 0.1% of GDP in 2026. 

(17)  Based on the Commission’s calculations, net expenditure in the Netherlands grew by 
7.2%  in  2025  and  10.6%  cumulatively  over  2024  and  2025.  The  net  expenditure 
growth  in  2025  is  above  the  maximum  growth  rate  recommended  by  the  Council  in 
January 2025,  corresponding  to  a  deviation  of  1.5%  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 
1.0% of GDP in cumulative terms. 

(18)  Based  on  the  Commission’s  calculations,  net  expenditure  in  the  Netherlands  is 
projected to grow by 4.9% in 2026. The projected net expenditure growth in 2026 is 
in  [date], 
above 
corresponding to a deviation of 0.1% of GDP in annual terms. 

the  maximum  growth  rate  recommended  by 

the  Council 

(19)  The Dutch system of private income taxation treats certain assets differently from the 
rest,  distorting  the  allocation  of  capital  and  economic  decisions.  Notably,  mortgage 
interest  deductions  –  coupled  with  the  low  imputed  rent  taxation  –  create  a  strong 
fiscal bias towards investing in housing, often debt-financed, over investing in shares 
and  bonds.  In  addition,  preferential  tax  treatment  is  also  extended  to  pension 
contributions and assets held in closely held companies which are companies in which 
the  majority  of  their  shares  are  owned  by  only  a  few  individuals.  Meanwhile, 
household  income  from  savings  and  investments  is  taxed  at  assumed  –  rather  than 
actual – rates of return, a practice that can risk amplifying economic cycles if the rates 
do not track actual outcomes. The government has started looking into transitioning to 
a capital growth tax, possibly by 2028. Implementing reforms that reduce this unequal 
tax  treatment  –  both  within  and  across  asset  types  –  will  lower  opportunities  for  tax 
arbitrage,  enhance  the  tax  system  as  an  automatic  stabiliser,  mitigate  economic 
inequalities,  and  promote  a  more  efficient  allocation  of  capital.  Given  its  role  in 

14 
15 

Eurostat, government expenditure by classification of functions of government (COFOG). 
This reflects the situation at the cut-off date of the Commission’s Spring 2026 Forecast (4 May 2026). 

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(20) 

driving  high  household  indebtedness,  lowering  the  unequal  tax  treatment  is  also 
relevant in addressing macroeconomic imbalances. 

In addition to the tax incentives mentioned above, overvaluation in the housing market 
has been fuelled by a limited responsiveness of new dwelling supply to strong demand 
fuelled  by  population  growth  and  increasingly  smaller  households.  The  housing 
shortage  is  projected  to  exceed  400 000  dwellings  in  2025  (16).  To  increase  housing 
supply  by  removing  key  obstacles  that  are  currently  holding  back  construction,  the 
government  could  advance  its  plans  to  streamline  the  planning  and  permitting 
processes, which on average take up to 6-7 years to complete, as well as simplify the 
building  regulation.  In  addition,  more  land  could  be  made  available  for  the 
construction of new dwellings. There are several other bottlenecks hindering progress, 
including  labour  shortages,  and  restrictions  to  construction  related  to  excessive 
nitrogen  deposition  and  electricity  grid  congestion.  Increasing  the  housing  supply  is 
relevant to mitigate macroeconomic imbalances. 

(21)  The  underdeveloped  private  rental  market  in  the  Netherlands  poses  significant 
affordability and availability challenges and elevates the risk of poverty for low- and 
middle-income  households.  While  recent  policy  measures,  such  as  the  extension  of 
regulated  rents,  have  provided  relief  for  some  tenants,  they  have  also  contributed  – 
alongside higher interest rates and tax changes – to a shrinking rental stock. This trend 
is  driven  by  landlords  selling  properties  to  owner-occupiers,  further  reducing  rental 
availability, while rents increased for units above the price cap. To stimulate growth in 
the private rental sector, investments in the private rental market could be made more 
attractive by recalibrating regulated rents more in line with property valuations, while 
avoiding a return to excessive rents. Such a balanced recalibration could help both to 
increase overall housing supply and to reduce incentives to take on mortgage debt to 
buy a house which, in turn, would support mitigating macroeconomic imbalances. 

(22)  The  Dutch  long-term  care  system  faces  significant  challenges  from  an  ageing 
population,  costly  institutional  care  and  generous  coverage  of  dependents.  The 
Netherlands  fares  well  compared  to  most  Member  States  in  terms  of  adequacy, 
availability  and  quality  of  the  long-term  care  system  as  well  as  the  size  of  the 
workforce  in  the  field.  However,  the  system  is  increasingly  putting  pressure  on  the 
government budget. In 2022, total long-term care spending in the Netherlands stood at 
3.8%  of  GDP,  the  highest  value  in  the  EU,  and  is  projected  to  increase  to  5.7%  of 
GDP  by  2070  according  to  the  Commission’s  2024  Ageing  Report.  Measures  to 
address  this  increase  could  include  aligning  co-payments,  i.e.  own  contributions  by 
patients,  to  the  cost  of  the  care  they  receive  across  different  types  of  benefits.  The 
system would be more cost-effective if patients determined their choice of care setting 
based on their individual care needs, instead of choosing a setting that minimises their 
co-payments. The coalition agreement of the incoming government contains efforts to 
improve  cost-effectiveness,  including  to  achieve  structural  savings  of  about  0.2%  of 
GDP in  the current  term.  Additional  investments in  prevention, in  order to  delay the 
onset of long-term care needs and further improving the delivery of community-based 
care could also help reduce costs. These improvements could ensure that the benefits 
of the system are allocated more efficiently without compromising the high coverage 
and quality of the system. 

16 

Based  on  European  Commission  and  JRC  calculations  and  forecast.  For  details,  see  Balouktsi  et  al. 
(2026) Housing investment needs in the EU. JRC Technical Report 144419. 

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(23)  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. 

(24)  The implementation  of cohesion  policy programmes,  which encompass support from 
the European Regional Development (ERDF), the Just Transition Fund (JTF) and the 
European  Social  Fund  Plus  (ESF+)  in  the  Netherlands,  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. The 
Netherlands  is  already  taking  action  under  its  cohesion  policy  programmes  to  boost 
competitiveness  and  growth.  It  is  essential  to  ensure  that  the  new  investments 
identified  by  the  Netherlands  in  its  mid-term  review  of  the  cohesion  policy  funds, 
notably  those  linked  to  the  five  priorities  identified  in  the  Mid-Term  Review 
Regulation (17), are deployed rapidly and effectively. 

(25)  The Netherlands faces several challenges related to insufficient investment in research 
and  innovation  and  limited  access  to  finance  for  start-ups  and  scale-ups,  continued 
reliance  on  fossil  fuels  alongside  electricity  grid  infrastructure  bottlenecks,  labour 
market  segmentation,  and  labour  and  skills  shortages,  including  low  basic  skills 
fields,  particularly  among 
achievement  and  under-participation 
underrepresented groups. 

in  STEM 

(26)  The  Dutch  innovation  ecosystem  benefits  from  strong  research  and  innovation 
framework  conditions,  but  public  R&D  intensity  remains  below  the  EU  average  and 
private  R&D  intensity  lags  behind  the  strongest-performing  countries  in  the  EU 
(Sweden,  Denmark  and  Finland)  and  global  innovation  leaders  such  as  the  United 
States. There is a risk that the progress in R&D will slow down further if these gaps 
are not  addressed. To address  these challenges,  the Dutch government  announced  an 
Action Plan to reach the 3% GDP target of R&D investment by 2030, including policy 
initiatives  such  as  the  creation  of  a  National  Agency  for  Disruptive  Innovation,  a 
revised  industrial  policy  in  key  sectors  like  semiconductors  or  biotechnology,  and 
support  regional  innovation  clusters.  However,  implementation  of  these  measures 
remains at an early stage. Ensuring coherence across these initiatives and the existing 
National Technology Strategy is essential to avoid policy fragmentation and maximise 
their  effectiveness.  Strengthening  public  support  for  innovation  can  help  boost  the 
innovation landscape, drive productivity growth and sustain the Netherlands’ position 
as a European innovation leader. 

(27)  Despite  having  one  of  the  deepest  venture  capital  markets  in  the  European  Union, 
some Dutch start-ups and scale-ups face difficulties in accessing funding. In particular, 
start-ups  encounter  constraints  at  the  pre-seed  stage  and  subsequently  struggle  to 
achieve successful scaling-up. A shortage of late-stage venture capital leads innovative 
Dutch  companies  to  seek  financing  or  relocate  abroad,  thereby  limiting  the 
Netherlands’  capacity to grow start-ups into large market  players. Public support for 
start-ups  and  scale-ups  has  so  far  involved  relatively  limited  financial  resources  and 
has lacked predictability. The Dutch government has announced the establishment of a 
National Investment Institution focusing on start-ups and scale-ups, which is expected 

17 

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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(28) 

(29) 

to  become  operational  in  2028.  However,  effective  implementation  and  continuous 
monitoring  will  be  crucial.  The  funding  gap,  if  left  unaddressed,  could  hinder 
innovation  and  long-term  competitiveness,  as  start-ups  and  scale-ups  tend  to  show 
higher productivity growth  than other new businesses. Beyond access  to  finance, the 
overall business environment also plays an important role in supporting start-ups and 
scale-ups.  Regulatory  complexity,  administrative  burden  and  uncertainties  in  the  tax 
framework can weigh on firms’ ability to innovate and scale. To address this issue, the 
Netherlands  could  benefit  from  expanding  the  use  of  financing  instruments,  such  as 
guarantees  and  fund-of-funds  structures,  to  mobilise  capital  and  attract  institutional 
investors.  The  national  investment  institution  could  also  help  ensure  policy 
predictability and reduce fragmentation. 

Innovation  activity  in  the  Netherlands  is  highly  concentrated  in  large,  established 
firms,  with  the  top  three  companies  accounting  for  around  a  quarter  of  total  R&D 
investment  in  2023,  while  young  and  small  companies  contribute  only  to  a  limited 
extent. Despite comparatively high levels of digitalisation among Dutch SMEs, there 
remains  a  significant  gap  between  small  and  large  firms  in  the  uptake  of  advanced 
technologies, like artificial intelligence and cloud computing. As a result, productivity 
growth  is  primarily  driven  by  incumbent  firms,  and  disparities  between  firms  within 
the same sectors are widening. There is room for productivity growth through further 
digitalisation  and  innovation  among  SMEs.  The  Dutch  government  has  announced  a 
revision of the R&D tax deduction scheme to simplify it and extend its scope, with the 
aim of incentivising smaller and newer firms to engage in R&D activities. To further 
address  these  challenges,  the  Netherlands  could  implement  a  mix  of  fiscal  and  non-
fiscal  measures,  including  digital  adoption  vouchers  and  grants,  tax  incentives  for 
investments  in  advanced  technologies  and  tailored  training  to  boost  digital  skills,  to 
promote the uptake of advanced technologies and strengthen the innovation capacity, 
particularly among SMEs. 

The Netherlands still relies heavily on fossil fuels. While the level of renewables in the 
electricity mix in the Netherlands is above the EU average,  and while the roll-out of 
renewable energy sources accelerated in 2024, the Netherlands made little progress in 
2025  in  the  roll-out  of  renewable  energy  sources.  At  the  same  time,  while  the  final 
energy consumption (FEC) decreased in the residential sector, the overall FEC in the 
Netherlands  increased  in  2024  compared  to  2023,  reversing  the  reduction  achieved 
since 2019. This  makes  the Dutch economy  vulnerable to  global price developments 
and hinders the transition to a green economy. Additional efforts are therefore needed 
to  reduce  reliance  on  fossil  fuels  and  improve  energy  efficiency  in  the  Netherlands, 
including in buildings and industrial processes. This could include measures to reduce 
financial risks in the offshore wind sector to maintain the attractiveness of investments 
in the sector. 

(30)  Electricity  grid  congestion  has  continued  to  worsen,  affecting  both  rural  and  urban 
areas,  and  both  the  transmission  and  distribution  networks.  This  hinders  the  clean 
energy  transition,  constrains  economic  activity,  and  undermines  the  Netherlands’ 
competitiveness.  Grid  congestion  is  being  addressed  through  a  combination  of 
increasing  investments  in  grid  and  regulatory  initiatives,  including  the  new  Energy 
Act.  Despite  these  actions,  grid  congestion  will  continue  being  a  major  challenge  in 
the  short  to  medium  term,  therefore  requiring  continued  attention  and  action.  The 
Netherlands  could  benefit  from  increasing  the  capacity  of  its  transmission  and 
distribution  grid,  implementing  and  incentivising  solutions  for  flexible  electricity 

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supply  and  demand,  maximising  cross-zonal  electricity  trading  over  existing  cross-
border infrastructure and further simplifying grid permitting procedures. 

(31) 

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  the  Netherlands  can  contribute  to  the  implementation 
of the Council Recommendation on human capital in the Union. 

(32)  Excessive levels of nitrogen deposition, resulting mainly, but not exclusively, from the 
intensive  agricultural  sector,  remains  a  significant  environmental  challenge  that 
impacts the Netherlands’ economy at large. Excessive nitrogen deposition leads to the 
over-fertilisation  and  acidification  of  soil  and  water  bodies,  while  at  the  same  time 
putting significant constraints on the permitting of construction activities. Surface and 
ground  water  quality  also  remains  a  concern.  The  implementation  of  concrete 
measures  is  needed  to  structurally  address  excessive  nitrogen  deposition  by  the 
emitting sectors and to drive a transition to sustainable agriculture, including organic 
farming.  In particular, the Netherlands could benefit from adopting farming practises 
that aim to cut nutrient and pesticide pollution and greenhouse gas emissions. 

(33)  The  share  of  flexible  employment  in  the  labour  market,  including  both  workers  on 
temporary contracts and the self-employed, remains high at 35.4% in the Netherlands, 
far  above  the  EU  average  of  20.6%.  While  some  degree  of  flexibility  supports 
economic  adaptability,  the  widespread  use  of  flexible  employment  has  deepened 
labour  market  segmentation  (i.e.  the  division  of  the  jobs  market  into  different 
categories of workers with different levels of job security and/or access to social and 
other  benefits).  Vulnerable  groups,  such  as  workers  with  lower  levels  of  skills  and 
people  with  a  migrant  background,  are  disproportionately  affected,  often  facing 
precarious  employment  conditions, 
training  and 
development,  inadequate  social  protection,  and  a  higher  risk  of  in-work  poverty  and 
social exclusion. These challenges not only exacerbate inequality in opportunities but 
also undermine long-term productivity. To increase protection and create a more level 
playing field for employees, the government is advancing a package of reforms aimed 
at  reducing  incentives  for  self-employment  and  flexible  employment.  To  this  end, 
speedy  implementation  of  a  mandatory  disability  insurance  for  self-employed  and 
providing  more  job  security  for  those  working  under  flexible  employment  contracts 
are crucial. 

limited  access 

including 

to 

(34)  Labour  and  skills  shortages  remain  a  key  challenge  in  the  Netherlands,  affecting 
sectors  related  to  the  twin  transition  and  to  societal  challenges  such  as  healthcare, 
education,  technology  and  ICT.  Structural  factors  continue  to  underpin  labour 
shortages,  such  as  the  low  average  number  of  hours  worked,  ageing  and  slow 
workforce  growth.  These  constraints  risk  hampering  productivity  growth  and 
competitiveness.  The  Netherlands  has  a  high  participation  rate,  but  untapped  labour 
potential among people with a migrant background and part-time workers, particularly 
women  remain.  Improving  work-life  balance,  including  through  better  access  to 
affordable child-care and attracting talent can help increase labour supply. Various up- 
and reskilling opportunities exist, but people at the margin of the labour market only 
benefit  to  a  limited  extent.  Challenges  related  to  job  quality  and  working  conditions 
persist  for  mobile  and  migrant  workers,  particularly  in  labour-intensive  sectors  that 
rely on flexible employment arrangements. Policy measures on the demand side could 
focus on addressing the structural drivers of labour-intensive, low-productivity sectors, 

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while  promoting  high  value-added  sectors  and  sectors  linked  to  societal  challenges, 
such as education, healthcare and the green and digital transitions, encouraging cross-
sector mobility. 

(35)  The  decline  in  basic  skills  of  students  in  the  Netherlands  poses  a  risk  to  the 
competitiveness  of  the  economy  and  to  labour  market  outcomes.  The  number  of 
underachievers has sharply increased in mathematics, science and reading over the last 
decade.  Equity  of  education  remains  a  challenge,  with  underachievement  being 
significantly  higher  among  disadvantaged  students  than  among  their  peers.  The 
Netherlands  could  strengthen  targeted  support  for  underperforming  schools,  foreign-
born students and students with a migrant background. Teacher shortages have eased 
but  remain  considerable  and  impact  students’  learning  outcomes.  To  make  the 
teaching  profession  more  attractive  and  help  to  attract  and  retain  teachers,  the 
Netherlands  could  improve  working  conditions  and  career  progression,  including  by 
lowering  the  administrative  burden  for  teachers  and  stimulating  more  diversified 
career paths. 

(36)  The  Netherlands  face  structural  challenges  in  developing  a  sufficiently  broad  STEM 
skills base. Despite strong participation in vocational and higher education, the share 
of graduates in STEM and ICT fields remains comparatively low across both levels of 
education, which increasingly constraints productivity. As a result, there are ongoing 
shortages in technical occupations, particularly in sectors such as construction, energy 
and  manufacturing,  which  are  critical  for  the  green  and  digital  transitions,  where 
demand for specialised skills continues to exceed supply. Women remain significantly 
under-represented in STEM fields, while students with a migrant background are less 
likely  to  pursue  STEM  pathways  and  more  affected  by  underachievement  in  basic 
skills.  These  disparities  are  linked  to  gender  stereotypes  and  wider  inequalities  in 
education, 
to  opportunities  for 
disadvantaged groups.  Addressing these issues  requires  targeted support  mechanisms 
and improved access to  career guidance to encourage broader participation in STEM 
pathways. Enhancing the inclusiveness and attractiveness of these fields is essential to 
widening  the talent  pool,  reducing  skills  shortages and ensuring that the Netherlands 
can respond to evolving labour market demands. 

in  performance  and  access 

including  gaps 

(37) 

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 RRP, to implement the 2026 Recommendation on the 
economic policy of the euro area. For the Netherlands, the recommendation (1) helps 
implement  the  first,  the second,  the  third  and  the  fifth  recommendations  on  the  euro 
area,  recommendation  (2)  helps  implement  the  fourth  recommendation  on  the  euro 
area, recommendations (3) and (4) help implement the seventh recommendation on the 
euro area, and the recommendation (5) helps implement the fifth recommendation on 
the euro area. 

HEREBY RECOMMENDS that the Netherlands take action in 2026 and 2027 to: 

1. 

Adhere  to  the  maximum  growth  rates  of  net  expenditure  recommended  by  the 
Council  on  [date].  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 

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savings  while  ensuring  that  their  fiscal  cost  is  compatible  with  the  commitments 
under the EU fiscal framework. Align the taxation of different types of income from 
wealth, including a gradual phase out  of mortgage interest deductibility.  Adopt and 
implement  measures  to  remove  obstacles  for  the  construction  of  new  dwellings  by 
simplifying  planning  and  permitting  procedures.  Support  the  development  of  the 
affordable  private  rental  sector,  including  by  recalibrating  regulated  rents.  Address 
the  expected  increase  in  age-related  expenditure  in  long-term  care  by  making  the 
system more cost-effective. 

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. 

Enhance public and private R&D intensity by targeting support to investments in key 
strategic  technologies  and  to  regional  innovation  ecosystems.  Address  the  funding 
gap  for  start-ups  and  scale-ups,  including  by  providing  incentives  to  attract 
institutional  investors.  Support  SMEs  to  innovate  and  adopt  new  technologies 
including through direct grants and tax incentives. 

Reduce overall reliance on fossil fuels by accelerating the roll-out of renewables and 
improving  energy  efficiency,  particularly  in  buildings.  Decrease  electricity  grid 
congestion  by  increasing  the  capacity  of  the  transmission  and  distribution  grid, 
implementing  flexibility  solutions,  maximising  cross-zonal  trade,  and  further 
simplifying  permitting  procedures.  Implement  structural  measures  to  address 
excessive nitrogen deposition and the deterioration of water quality effectively, with 
particular attention to sustainable agriculture. 

Adopt  and  implement  measures  to  reduce  incentives  to  use  flexible  or  temporary 
employment contracts. Address labour and skills shortages, including by tapping into 
underused labour potential and by increased targeting of up- and reskilling measures. 
Promote  reallocation  of  labour  to  high-productivity  sectors  and  sectors  related  to 
societal  challenges,  while  improving  working  and  living  conditions  for  mobile  and 
migrant workers. Improve students’ basic skills, including by making the profession 
of  teacher  more  attractive  and  by  providing  tailored  support  to  disadvantaged 
schools. Boost participation in STEM programmes. 

2. 

3. 

4. 

5. 

Done at Brussels, 

For the Council 
The President 

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