COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2026 European Semester - Spring Package
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: EU employment policy, EU energy policy, European Semester, competitiveness, defence policy, economic policy, innovation, investment, macroeconomics, single market

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 3.6.2026  COM(2026) 200 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2026 European Semester - Spring Package            
 
 
1. 

INTRODUCTION 

At a time of major geopolitical shifts and tensions, the EU needs to continue strengthening 
its competitiveness and strategic autonomy to sustain its economic and social resilience and 
cohesion.  The  economic  environment  is  marked  by  profound  geopolitical  uncertainty  and 
intensifying  global  competition,  persistent  global  tensions,  heightened  security  risks,  and 
increasingly  severe  climate  change  impacts.  In  addition,  persistent  energy  price  volatility  and 
rising  global  tariffs  continue  to  elevate  the  cost  of  living,  strain  supply  chains  and  increase 
operational  costs,  affecting  in  particular  small  and  medium-sized  enterprises  (SMEs).  These 
developments  expose  several  weaknesses  and  compound  Europe’s  long-standing  challenges 
linked to subdued productivity growth and innovation. However, the EU has also shown resilience 
by  navigating  multiple  crises.  It  is  implementing  an  ambitious  competitiveness  agenda  and  is 
making progress on digital innovation, decarbonisation goals, and economic security.  

The 2026 European Semester Spring Package aims to build on the EU’s strengths through 
coordinated action to boost competitiveness, secure strategic autonomy, increase resilience, 
and  strengthen  preparedness  while  maintaining  fiscal  sustainability.  The  Competitiveness 
Compass (1) remains the guiding framework for this European Semester cycle. It builds on the vast 
potential  of  the  single  market,  fosters  macroeconomic  and  fiscal  stability  and  aligns  structural 
reforms  and  investments  with  the  EU’s  strategic  priorities  of  closing  the  innovation  gap, 
decarbonising our economy, reducing strategic dependencies, promoting skills and quality jobs, 
ensuring social fairness and cohesion, and simplifying the business environment. These are also 
some of the core ambitions of the “One Europe, One Market” roadmap, the swift implementation 
of which remains crucial. The EU is pursuing these objectives while upholding its commitment to 
implementing the European Pillar of Social Rights and the UN Sustainable Development Goals. 

The 2026 European Semester provides  a comprehensive framework to align national  and 
regional  reforms  and  investments  with  EU  priorities.  Building  on  the  progress  achieved 
through the Recovery and Resilience Facility (RRF), which has boosted reform and  investment 
implementation, and the mid-term review of cohesion policy, the 2026 European Semester will 
continue to provide a key analytical basis to identify and prioritise reform and investment needs 
across a broad range of policy areas including measures to address economic, social and territorial 
disparities. Taking into account this analysis, the EU, Member States and other stakeholders need 
to  coordinate  investments  and  reforms  to  improve  the  EU’s  economic  security  and  strengthen 
strategic EU-wide value chains within shared competitiveness priorities. In this Spring Package, 
the Commission places  a strong emphasis  on  assessing  the progress  made in implementing the 
comprehensive set of 2025 country-specific recommendations (CSRs). Coherence and synergies 
between the European Semester and other governance frameworks, such as the Digital Decade and 
the CAP recommendations, will be ensured.  

1A Competitiveness Compass for the EU, COM(2025) 30 final. 

1 

 
 
 
The Commission calls on the European Council to endorse and on the Council of the EU to 
adopt the Commission recommendations for the 2026 CSRs. It also calls on all Member States 
to implement the CSRs fully and in a timely manner, in close dialogue with their social partners, 
civil society organisations and other stakeholders. 

2. 

 KEY POLICY CHALLENGES AND RECOMMENDATIONS  

Responding to emerging threats 

Addressing the energy crisis  

Fossil fuels are at the core of the current energy crisis, which highlights the urgent need for 
a  decisive  European  response  to  ensure  clean,  homegrown  and  affordable  energy,  and 
security  of  energy  supply,  and  to  safeguard  EU  industrial  competitiveness.  The  energy 
transition  remains  the  most  effective  strategy  for  achieving  Europe’s  strategic  autonomy, 
strengthening resilience, structurally lowering energy prices, and delivering the clean, abundant 
and  homegrown  energy  needed  to  power  the  economy  of  the  future.  REPowerEU,  which  was 
launched  in  May  2022  to  respond  to  Russia’s  full-scale  invasion  of  Ukraine  has  already 
demonstrated that joint action can effectively reduce energy demand and imports, stabilise energy 
markets, strengthen resilience and boost electrification. Thanks to energy investments supported 
by several EU funds, the EU is significantly better placed than before to withstand energy market 
volatility. In particular, the Connecting Europe Facility helped finance critical cross-border energy 
infrastructure,  thereby  strengthening  interconnections  and  supporting  the  development  of  an 
integrated and sustainable European energy market, and a genuine Energy Union. 

Through  the  Accelerate  EU  initiative  ( 2 ),  the  Commission  has  proposed  a  coordinated 
approach to bring immediate relief to vulnerable households and companies facing energy 
price  spikes,  and  to  make  the  energy  system  more  resilient.  To  ensure  security  of  supply, 
greater EU coordination, including for the refilling of gas storage facilities for the winter and the 
collective release of oil reserves is essential. It will be equally important to ensure the availability 
of critical fuels, such as jet fuel and diesel, and avoid disruptions to cross-border transport and the 
single market. At the same time, Member States need to ensure that emergency measures taken to 
reduce  the  economic  and  social  impact  of  the  energy  crisis  on  households  and  businesses  are 
temporary, targeted, timely, proportionate, and fiscally sustainable, and that they do not increase 
the demand for fossil fuels. With the Middle East crisis Temporary State aid Framework (3), the 
Commission  adopted  targeted  and  temporary  rules  to  facilitate  support  for  the  most  exposed 
sectors  of  the  economy.  Finally,  the  EU  needs  to  speed  up  the  energy  transition  to  continue 
reducing its reliance on fossil fuels – the only way to ensure our true energy independence. The 
EU, Member States, industry and all other relevant stakeholders must continue their joint efforts 

2 AccelerateEU, COM(2026) 370 final. 
3 Communication from the Commission – Middle East Crisis Temporary State Aid Framework, OJ C, C/2026/2593, 5.5.2026; 
ELI: http://data.europa.eu/eli/C/2026/2593/oj. 

2 

 
 
 
 
to improve energy infrastructure across Europe, including by advancing the Energy Highways set 
out in the European Grids Package. The upcoming electrification action plan will set an ambitious 
electrification  target  and  measures  to  address  barriers  in  the  industrial,  transport,  and  building 
sectors. The Commission will also present a legislative proposal on network charges and taxation, 
ensuring that electricity is taxed less than natural gas, among other things. The Commission will 
coordinate an EU exercise (AccelerateEU investment chapter) to assist Member States to make 
maximum use of and reallocate available EU funding, e.g. cohesion policy funds, where feasible 
and in line with Member States’ and regions’ preferences. In parallel, the Circular Economy Act 
will support industries in replacing virgin fossil materials with circular and bio-based ones. These 
efforts should go hand in hand with accelerated and full implementation of the REPowerEU plan 
and  energy-related  CSRs  to  provide  clean  and  affordable  energy,  circular  solutions,  enhance 
energy security, and strengthen resilience to external price shocks. It should also be in line with 
other  initiatives,  such  as  RESourceEU,  that  prevent  the  weaponisation  of  the  EU’s  excessive 
dependencies on raw materials.  

Bolstering economic security 

Economic  security  remains  a  pressing  priority  for  the  EU  amid  persistent  geopolitical 
tensions, supply chain vulnerabilities, and strategic dependencies. Member States continue to 
face  risks  stemming  from  strategic  dependencies,  particularly  in  energy,  critical  raw  materials, 
fertilisers and key technologies, which expose economies to price volatility, risks to food security, 
disruptions, and external pressure. While progress has been made in diversifying energy sources, 
reducing  dependence  on  single  suppliers,  and  accelerating  the  clean  and  digital  transitions, 
challenges persist. Energy-intensive industries remain vulnerable to high energy prices, and delays 
in  renewable  deployment,  grid  resilience,  and  storage  investments  hinder  long-term  energy 
security.  Critical  raw  material  dependencies,  often  concentrated  in  non-EU  suppliers,  threaten 
strategic sectors essential for the digital and clean transitions, underscoring the need for circular 
economy  advancements,  domestic  production,  and  supply  chain  diversification.  To  strengthen 
economic  security,  Member  States  must  deepen  Single  Market  integration,  fast-track  strategic 
investments  in  clean  technologies  manufacturing  capacity,  technological  sovereignty  and 
cybersecurity,  infrastructure  resilience,  and  crisis  preparedness.  The  proposed  Industrial 
Accelerator Act aims to promote Europe’s economic security by strengthening industrial capacities 
in key sectors while keeping on track with the transition to decarbonised manufacturing. 

Enhancing the EU’s defence readiness  

Member States continue to strengthen their defence readiness and capabilities as called for 
in the 2025 CSRs. Member States have made progress in strengthening their defence readiness 
and capabilities, in particular thanks to the additional fiscal space of up to 1.5% of GDP in 2025-
2028 linked to  the activation of the national  escape  clause in 17 Member States. These  efforts 
should be sustained, including through investments to ramp up and modernise production capacity 
to meet the demand surge. Joint procurement initiatives, which offer demand visibility to industry, 

3 

 
 
reduce market fragmentation and can lower unit costs, must be continued. Progress on these fronts 
is necessary and in line with the Commission’s European Defence Readiness 2030 objectives. To 
this end, the Security Action for Europe (SAFE) initiative is providing up to EUR 150 billion in 
competitively priced, long-maturity loans to Member States requesting financial assistance for the 
procurement  of  defence  capabilities.  The  Commission  has  already  endorsed  18  out  of  the  19 
national defence investment plans submitted by Member States to request SAFE loans, to provide 
redirected 
EUR 130 billion  of 
EUR 11.9 billion  towards  defence  and  dual-use  investment  under  the  medium-term  review. 
Looking ahead, there is a critical need for sustained, long-term investment in civil preparedness, 
including  to  enhance  national  cybersecurity  and  space  assets,  which  is  a  strategic  enabler  of 
defence  readiness.  This  need  is  underscored  by  developments  in  the  eastern  regions  bordering 
Russia, Belarus, and Ukraine. 

financial  support.  Additionally,  cohesion  policy  has 

Ensuring macroeconomic stability  

Member States need to sustain medium-term fiscal sustainability against a background of 
competing needs for public finances. Member States face growing demands on public spending 
driven  by  the  urgent  need  to  bolster  defence  spending  and  boost  competitiveness,  while  also 
confronting the long-term fiscal costs of demographic change (4) and the rising costs of climate 
change impacts, in a context of already high public debt. In parallel, the EU’s external environment 
has become more uncertain, which compounds the challenges for the economies and the policy 
making of the Member States and the EU. As part of the European Semester, the Commission has 
assessed  Member  States’  compliance  with  the  requirements  stemming  from  the  European 
economic  governance  framework,  which  is  built  around  Member  States’  medium-term  fiscal 
structural plans (see Box 1).  

Measures  that  strengthen  the  structural  resilience  of  the  European  energy  system  and 
accelerate the transition away from fossil fuels may benefit from the existing flexibility within 
the fiscal framework. In order to preserve Europe’s long-term energy security and mitigate the 
economic implications associated with the conflict in the Middle East, Member States will be faced 
with substantial fiscal costs in the short run. Upon request by the Member States, the scope of the 
current  National  Escape  Clause  for  defence  spending  could  be  broadened  to  accommodate  the 
measures undertaken since February 2026 to reduce the dependence on imported fossil fuels and 
thereby contribute to Europe’s security and defence. Measures which could be considered would 
include support for households and firms to reduce their dependency on fossil fuels and promote 
decarbonisation,  measures  that  accelerate  electrification  of  end  use  sectors,  investments  in 
electricity  grids,  storage  of  electricity  (e.g.  batteries),  energy  saving  and  capacity  expansion  of 
clean energy sources. 

4 Communication from the Commission to the European Parliament, the Council, the European Economic and Social 
Committee and the Committee of the Regions “Demographic change in Europe: a toolbox for action”. 

4 

 
 
 
 
Fiscal sustainability safeguards would remain fully in place. The existing cap on the flexibility, 
of up to 1.5% of GDP in additional expenditure, under the National Escape Clause for defence 
would remain unchanged. Therefore, while the scope of the flexibility may be broadened the risk 
to fiscal sustainability would remain contained. Within the existing cap (1.5% of GDP), a dedicated 
annual  cap  of  0.3%  of  GDP  would  apply  specifically  to  the  energy  support  measures  and  be 
available for 2026-2028 (5), with a cumulative cap of 0.6% of GDP over that same period. These 
limits are consistent with the purpose of addressing unavoidable short-term fiscal costs and ensure 
a  balance  between  the  flexibility  provided  for  energy-related  supports  and  those  available  for 
defence  expenditure.  The  expenditure  exceeding  the  cap  would  remain  subject  to  the  standard 
compliance assessments  under the fiscal framework. Member States should continue to use the 
period until 2028 to make the necessary budgetary adjustments to accommodate the higher level 
of defence spending in the future. 

Member  States  will  have  the  opportunity  to  request  the  expansion  in  the  scope  of  their 
existing  National  Escape  Clause  over  the  coming  months.  Member  States  that  have  not  yet 
requested the activation of the National Escape Clause for defence may do so at any time. The 
Commission will assess all requests received to ensure that the extension or activation of the clause 
does not endanger fiscal sustainability over the medium term. The Commission will provide in due 
time  further  clarity  to  Member  States  around  the  procedural  and  operational  requirements, 
including the reporting by Member States of sufficiently granular data and information to monitor 
and assess eligibility of the proposed measures in support of strengthening the structural resilience 
of the European energy system and accelerating the transition away from fossil fuels, and conduct 
fiscal surveillance. 

Over the past year, macro-financial vulnerabilities have evolved diversely across Member 
States, having narrowed in some cases, while uncertainty has augmented very recently. Some 
Member States face particular challenges to their macroeconomic stability, which in some cases 
have cross-border relevance, thereby are a concern for the euro area and the EU as a whole. Under 
the  macroeconomic  imbalance  procedure,  the  Commission  has  identified  macroeconomic 
imbalances or excessive imbalances in four Member States (see Box 2 and Appendix 4). 

Box 1: Fiscal surveillance under the Stability and Growth Pact 

In  spring  2026,  the  Commission’s  assessment  of  Member  States’  compliance  with  the 
relevant Council recommendations covers both 2025 and 2026. The assessment for 2026, 
based on the Commission Spring 2026 Forecast, will be followed up by a further assessment in 
autumn, and another assessment will take place in spring 2027 based on outturn data for 2026. 
The  core  of  the  Commission’s  assessment  consists  in  comparing  outturn  data  and  the 

5 To ensure equal treatment, Member States that might have already fully used the flexibility under the NEC to increase 
defence expenditure could receive temporary and limited additional flexibility under the same conditions, including 
the condition that overall fiscal sustainability risks remain contained. 

5 

 
 
 
 
Commission’s projections for net expenditure (6) growth with the maximum growth rates of net 
expenditure as recommended by the Council (see Appendix 5 and the Fiscal Statistical Tables 
(7). For Member States for which the national escape clause for defence spending (8) has been 
activated (9), the assessment of compliance takes this flexibility into account (10).  
For  the  ten  Member  States  currently  under  excessive  deficit  procedure  (EDP)(11),  the 
Commission assessed the action taken in response to the Council recommendations under 
the  EDP.  For  Malta,  the  Commission  is  today  recommending  to  the  Council  to  close  the 
excessive deficit procedure, as the general government deficit was successfully reduced to below 
3% of GDP in 2025 – in advance of the deadline that the Council established – and is projected 
to remain below 3% of GDP in 2026 and 2027. At the same time, the Commission notes that, 
for Malta, the net expenditure growth is above the ceilings recommended by the Council in both 
2025 and 2026,  with  the corresponding deviations in  cumulative terms  being  above 0.6% of 
GDP.  For  the  nine  other  Member  States  under  EDP  (Belgium,  France,  Hungary,  Italy, 
Austria,  Poland,  Romania,  Slovakia  and  Finland),  and  after  accounting  for  the  flexibility 
from the national escape clause where relevant, the Commission considers that effective action 
has been taken at this stage and that the procedure should be kept in abeyance. For Italy, the net 
expenditure  growth  in  2025  was  above  the  recommended  ceilings.  However,  in  cumulative 
terms, the net expenditure growth over 2024-2025 was only marginally above the recommended 
ceilings, and Italy is projected to correct the excessive deficit in 2026, in line with the deadline 
set by the Council (12). At the same time, the Commission assesses France to be at risk of non-
compliance with the recommended annual growth rate of net expenditure in 2026 by a small 
margin,  while  it  is  projected  to  be  compliant  with  the  cumulative  growth  rate.  Hungary  is 
assessed to be at risk of material non-compliance in 2026. Therefore, on current projections, an 
overall assessment of action taken may be needed at  a later stage.  In  case these assessments 
would point to a lack of effective action, this could then require a stepping-up of the EDP (13). 

6  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. 
7 Fiscal  Statistical  Tables  providing  background  data  relevant  for  the  assessment  of  the  budgetary  policies  of  the 
Member States, SWD(2026) 200 final, Brussels 3.6.2026. 
8 The national escape clause for higher defence spending provides limited and temporary flexibility, up to 1.5% of 
GDP compared to a reference year, over the period 2025 to 2028. 
9 To date, the Council has activated the national escape clause for defence spending for 17 Member States (Belgium, 
Bulgaria,  Czechia,  Denmark,  Germany,  Estonia,  Greece,  Croatia,  Latvia,  Lithuania,  Hungary,  Austria,  Poland, 
Portugal, Slovenia, Slovakia, Finland). For Spain, on 22 May 2026 the Commission has adopted recommendation to 
the Council to activate the national escape clause for defence, which is now pending adoption by the Council. 
10 For those Member States, the assessment focusses on the comparison in cumulative terms, and checks whether any 
positive deviation from the recommended ceilings is explained by a corresponding increase in defence expenditure. 
The flexibility provided for by the national escape clause for defence is the only flexibility taken into account in the 
Commission’s assessment in spring 2026. 
11 Belgium, France, Italy, Hungary, Malta, Austria, Poland, Romania, Slovakia and Finland. 
12 Based on data provided by Eurostat, Italy’s general government deficit decreased from 3.4% of GDP in 2024 to 
3.1% of GDP in 2025. Based on policy measures known by the cut-off date of the forecast, the Commission Spring 
2026 Forecast projects a deficit of 2.9% of GDP in both 2026 and 2027. 
13 At the current juncture, there is no outturn data for 2026 and a stepping-up of the procedure could be considered at 
a  later  stage  if  the  comparison  between  net  expenditure  growth  projected  in  the  Commission  forecast  and  the 

6 

 
 
 
Also,  the  Commission  stresses  that  the  fiscal  situation  in  Romania  remains  fragile  with  the 
largest 2025 deficit ratio in the Union and where there are serious implementation risks which 
require a strong and persistent focus on fiscal adjustment in 2026 and subsequent years. 

For the Member States not currently in EDP, the Commission assessed progress with the 
implementation  of  the  medium-term  plans  and  compliance  with  the  relevant  Council 
recommendations.  Among  these,  in  2025,  and  after  accounting  for  the  flexibility  from  the 
national escape clause where relevant: 

•  Czechia,  Denmark,  Germany,  Estonia,  Greece,  Spain,  Latvia  and  Sweden  are 
assessed as compliant, as the net expenditure growth is below the maxima recommended 
by  the  Council  or  the  cumulated  deviation  is  within  the  flexibility  provided  by  the 
national escape clause.  

•  Ireland, Cyprus and Portugal are deemed to be compliant with the budgetary policy 
obligations  of  the  Stability  and  Growth  Pact  thanks  to  their  budgetary  position  in 
surplus, thus contributing to a reduction in their government debt-to-GDP ratios. At the 
same  time,  the  Commission  notes  that  Portugal  exceeds  the  recommended  maximum 
growth of net expenditure, while Cyprus and Ireland materially exceed the recommended 
maximum growth of net expenditure. 

•  Lithuania and Slovenia are assessed as non-compliant since the net expenditure growth 
is  above  the  ceilings  recommended  by  the  Council,  but  the  corresponding  deviations 
remain  below  the  0.6%  of  GDP  (in  cumulative  terms)  threshold.  However,  the 
Commission notes that for Lithuania the general government deficit and public debt are 
projected below the 3% and 60% of GDP reference values. 

•  Luxembourg, the Netherlands, Bulgaria and Croatia are assessed as materially non-
compliant  with  the  recommended  net  expenditure  ceilings,  with  the  corresponding 
deviations above the 0.3% of GDP (in annual terms) and/or 0.6% of GDP (in cumulative 
terms) thresholds. At the same time, the Commission notes that for Luxembourg and the 
Netherlands the government deficit and public debt are below the 3% and 60% of GDP 
reference values in 2025. 

In 2026, again after accounting for the flexibility from the national escape clause where relevant:  

•  Czechia, Denmark, Estonia, Germany, Ireland, Greece, Latvia are projected to be 
compliant,  as  the  net  expenditure  growth  is  below  the  maxima  recommended  by  the 
Council  or  the  cumulated  deviation  is  within  the  flexibility  provided  by  the  national 
escape clause.  

•  As in 2025, Cyprus and Portugal are projected to be compliant with the budgetary 
policy obligations of the Stability and Growth Pact thanks to their budgetary position 
projected  to  stay  in  surplus  or  close  to  balance  in  2026.  At  the  same  time,  the 
Commission notes that Portugal risks to exceed the recommended maximum growth of 
net  expenditure  and  Cyprus  is  at  risk  of  materially  exceeding  the  recommended 
maximum growth of net expenditure. 

recommended corrective net expenditure path (taking the flexibility for defence spending under the national escape 
clause into consideration as appropriate) pointed to a particularly serious case of non-compliance. 

7 

 
 
 
•  Spain,  Luxembourg  and  the  Netherlands  are  found  at  risk  of  non-compliance. 
However, for Luxembourg and the Netherlands the Commission notes that the general 
government deficit and public debt are projected below 3% of GDP and 60% of GDP 
respectively in 2026. 

•  Lithuania and Slovenia, and, as in 2025, Bulgaria and Croatia, are assessed at risk of 
material non-compliance in 2026. At the same time, the Commission notes that, for 
Lithuania  and  Croatia,  the  general  government  deficit  and  public  debt  are  projected 
below the 3% and 60% of GDP reference values. Finally, for Slovenia, a confirmation 
of  the  material  non-compliance  based  on  outturn  data  for  2026  could  trigger  a  report 
under Article 126(3) TFEU for the assessment of compliance with the debt criterion. 

•  Sweden  is  assessed  at  risk  of  material  non-compliance  with  the  recommended 
annual growth rate of net expenditure in 2026, while it is projected to be compliant 
with  the  cumulative  growth  rate.  At  the  same  time,  the  Commission  notes  that  for 
Sweden the general government deficit and public debt are projected below the 3% and 
60% of GDP reference values. 

In  the  assessment  of  implementation  of  the  medium-term  plans,  the  Commission  also 
considered the set of investments and reforms underpinning an extension of the respective 
fiscal  adjustment  periods.  This  concerns  eight  Member  States  ( 14 ),  for  which  the  fiscal 
adjustment period in these plans had been extended from four to seven years. For these Member 
States, the Commission has assessed the implementation of the key steps of those reforms and 
investments, taking into account the information provided in the Annual Progress Reports. In 
the light of its assessment, the Commission considers that, overall, all the concerned Member 
States  have  complied  with  their  commitments  in  terms  of  reforms  and  investments  in  a 
satisfactory manner (see Appendix 5). 

Finally, the Commission has assessed compliance with the deficit criterion for five Member 
States (15), to decide whether there is case to recommend to the Council new decisions on 
the existence of an excessive deficit. The assessment leads to the conclusion that at this stage 
there is no case to open an excessive deficit procedure for Germany, Estonia and Slovenia. For 
Latvia, overall, the deficit criterion  is assessed as fulfilled. Instead, for Bulgaria, taking into 
account the Opinion of the Economic and Financial Committee on its report, the Commission 
will consider proposing to open an excessive deficit procedure.  

Given the recent developments in the energy markets since the outbreak of the war in the 
Middle East in February 2026, many Member States have adopted fiscal policy measures 
to  mitigate  the  social  and  economic  impact  of  high  energy  prices  on  households  and 
businesses. The Commission Spring 2026 Forecast incorporates the budgetary cost of such new 
measures of EUR 14.5 bn (0.07% of the EU GDP) in 2026 for the EU as a whole. This estimate 
assumes that the measures will come to an end in accordance with the expiring dates stated in 

14 Belgium, Germany, Spain, France, Italy, Austria, Romania and Finland. 
15 Report from the Commission, prepared in accordance with Article 126(3) of the Treaty on the Functioning of the 
European Union, 3.6.2026, COM(2026) 302 final. Among the Member States currently not in EDP, at end of 2025 
the  general  government  gross  debt  ratio  exceeded  the  reference  value  in  Germany,  Greece,  Spain,  Portugal  and 
Slovenia. For these Member States, the debt ratio is assessed as sufficiently diminishing and approaching the reference 
value at a satisfactory pace. Therefore, there were no Member States for which compliance with the debt criterion had 
to be further examined in the report under Article 126(3) TFEU. 

8 

 
 
 
the respective laws at the cut-off date of the forecast. If these measures were to be extended until 
end-2026,  their  fiscal  cost  would  increase  to  EUR 38.6 bn  (0.2%  of  the  EU  GDP)  in  2026. 
Three-quarters of the support is being spent in a non-targeted manner, with the remaining quarter 
being targeted at vulnerable households or energy-intensive firms. Moreover, more than two-
thirds of the estimated budgetary cost corresponds to measures that aim at directly impacting 
the marginal cost of energy consumption, such as cuts to excise duties. The remaining one-third 
corresponds to measures that provide temporary income support to households or (non-price) 
compensations to firms. 

Box 2: Macroeconomic imbalances in the Member States 

The Commission has assessed the existence of  macroeconomic imbalances for the seven 
Member  States  selected  for  in-depth  reviews  in  the  2026  Alert  Mechanism  Report.  All 
those  Member  States  had  been  identified  with  imbalances  or  excessive  imbalances  in  the 
previous cycle of surveillance under the macroeconomic imbalance procedure (MIP). Like in 
the past two MIP annual cycles, the 2026 in-depth reviews were presented to the Member States 
before the publication of the Spring Package to enable more in-depth multilateral discussions in 
the Council Committees before the country-specific recommendations were formulated (16).  

The classification of imbalances is based on three criteria: (i) the gravity of imbalances; 
(ii) their evolution and prospects; and (iii) policy responses. These criteria are considered 
within  the  forward-looking  orientation  of  the  MIP  applied  since  the  economic  governance 
review concluded in 2024. Specifically, under the forward-looking approach, those three criteria 
remain in place, but more emphasis is placed on the evolution and prospects of imbalances and 
the policy responses by the national authorities to overcome those imbalances or the risks they 
present.  

Over the past year, vulnerabilities have evolved diversely across Member States but have 
narrowed in several cases, while uncertainty has augmented recently. Inflation fell further 
in most of the euro area and the EU, though at different speeds, current accounts improved, and 
high debts declined in various cases, while the banking sectors have remained healthy. On the 
contrary, house prices accelerated in several countries. Nonetheless, this annual cycle of MIP 
implementation ends against a backdrop of higher uncertainty, as the conflict in the Middle East 
has raised concerns about energy prices, higher and more volatile inflation,  tighter financing 
conditions, and slower economic growth. Predicting how risks will evolve and how they will 
affect the macroeconomic stability of the EU, the euro area, and of the individual Member States, 
has become more challenging.  

The Commission took several decisions under the MIP. Vulnerabilities are receding in a few 
of the Member States subject to an in-depth review and in some cases leading to a finding of no 
imbalances under the MIP. Relevant challenges remain in the other Member States for which an 
in-depth review was undertaken. In particular: 

•  Greece  is  assessed  as  no  longer  experiencing  imbalances.  Vulnerabilities  related  to 
government and external debt have receded over recent years, supported by steady GDP 

16 SWD (2026) 137 to 143. The seven in-depth reviews were shared with Member States through the Council’s Economic Policy 
Committee and its LIME working group in two batches, one in mid-April (for the Netherlands, Romania, Sweden), another one in 
early-May (for Greece, Hungary, Italy, Slovakia). They are also published as European Economy Institutional Papers. 

9 

 
 
 
 
growth, with budgetary surpluses further contributing to decreases in government debt; 
banks’ non-performing loans have declined and balance sheets have improved; the current 
account  deficit  remains  sizeable  but  its  favourable  financing  mitigates  external 
sustainability risks; Greece has implemented relevant reforms to reduce its long-standing 
vulnerabilities. 

•  The Netherlands is assessed as no longer experiencing imbalances. 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. 

•  Sweden is  assessed as no longer experiencing imbalances. Vulnerabilities related to its 
real  estate market  and high levels of private debt remain but their gravity has lessened 
recently. 

• 

Italy continues to experience imbalances as vulnerabilities related to high government debt 
and weak productivity growth, which have cross-border relevance, persist, and continued 
and effective implementation of growth-enhancing reforms and investments, together with 
a prudent fiscal stance, remains crucial to reduce those vulnerabilities. 

•  Hungary continues to experience imbalances as vulnerabilities related to competitiveness, 
government  financing  needs,  and  house  prices  persist,  and  policies  have  continued 
compounding those vulnerabilities. 

•  Slovakia continues to experience imbalances as vulnerabilities related to the external and 
government balances, competitiveness, the housing market, and household debt persist, 
with policy action remaining limited. 

•  Romania continues to  experience excessive imbalances;  vulnerabilities related to  fiscal 
and  current  account  deficits  have  diminished  somewhat  recently  but  remain  very 
significant, while cost competitiveness continues deteriorating albeit less than before. The 
Commission will continue monitoring the progress of relevant policy action to overcome 
those excessive imbalances. 

Appendix 4 details the country-specific aspects for the seven Member States concerned. 

Against  this  backdrop,  and  in  light  of  the  persistently  high  debt  ratios  in  a  number  of 
Member States, enhancing the quality of public finances and the efficiency of spending is 
critical to delivering real value for taxpayers and ensuring fiscal sustainability. This requires 
a strong prioritisation of spending and making it more efficient and effective, including through 
spending reviews. In parallel, modernising and streamlining taxation systems can help generate 
the  necessary  revenues  while  fostering  economic  resilience.  To  support  credible  and  growth-
friendly  fiscal  policies,  several  countries  have  reformed  their  overall  fiscal  governance.  Some 
countries have strengthened independent fiscal institutions, made public finance reporting more 
transparent and improved the management of public investments. The 2026 CSRs call on Member 
States to enhance the quality of public spending by making health care and long-term care systems 
more sustainable and by stepping up the use of spending reviews for example in Poland, Slovenia, 
and Spain. This is particularly relevant in Member States where public revenue as a share of GDP 

10 

 
 
 
is already high. Some Member States are also recommended to improve the sustainability of their 
pension  systems.  For  instance,  Austria,  Germany,  Italy,  Luxembourg  and  Poland  are 
recommended  to  apply  measures  that  encourage  a  higher  effective  retirement  age.  Meanwhile, 
Cyprus, Czechia, Lithuania, Malta, and Portugal – as well as Austria, Germany, and Luxembourg 
– should support retirement income by strengthening their supplementary pension schemes, which 
also supply long-term capital to their economies.  

A number of Member States have taken action to strengthen tax compliance and modernise 
revenue collection. Among the Member States that had received a CSR related to taxation policy 
in 2025, examples of positive developments include enhanced digitalisation of tax administrations 
– such as Greece’s digital tax reporting system and related e-invoicing reforms and Portugal’s steps 
to improve compliance by streamlining and digitalising tax procedures. Several Member States are 
making efforts towards  broadening  their tax bases  and  rebalancing  their  tax mix. Additionally, 
some efforts to combat tax evasion and avoidance have progressed. By comparison, less progress 
has  been  made  on  the  long-standing  need  to  tackle  aggressive  tax  planning  and  the  significant 
challenges  posed  by  tax  gaps.  European  governments  forego  more  than  EUR 100 billion  in 
revenue  every  year  due  to  tax  non-compliance.  Furthermore,  there  are  several  thousand  tax 
expenditure  provisions,  which  can  be  costly  and  do  not  always  have  a  good  rationale.  Such 
complexity in taxation hinders fair and efficient revenue mobilisation. The proposed 2026 CSRs 
call  for  reducing  these  gaps  to  safeguard  tax  fairness  and  revenue  sustainability,  while  further 
improving  the  tax  mix  to  support  sustainable  competitiveness.  For  instance,  Ireland,  Poland, 
Bulgaria and Estonia are recommended to broaden tax bases, including by tapping into revenue 
from  tax  sources  less  detrimental  to  growth.  Continued  modernisation  and  digitalisation  of  tax 
administrations can help achieve these objectives.  

Strengthening the EU’s competitiveness  

Channelling savings towards productive investments to boost competitiveness  

In  2025-2026,  Member  States  made  modest  progress  in  improving  access  to  finance,  and 
disparities  persist  across  Member  States.  Positive  developments  include  robust  banking  and 
insurance  sectors  and  continued  financial  stability.  However,  challenges  endure,  including 
persistent financing gaps, especially for scaleups, but in some Member States also start-ups and 
SMEs; inefficient insolvency frameworks in several Member States; and still under-developed and 
fragmented capital markets that fail to sufficiently complement debt finance provided by banks.  

With  the  proposed  2026  CSRs,  the  Commission  calls  for  national  measures  to  build  the 
Savings and Investments Union (17). The Commission calls on several Member States to expand 
their  financing  sources  by  incentivising  institutional  and  retail  investor  participation  in  capital 
markets, notably equity markets. In many Member States, supplementary pension funds have the 
potential to both improve individuals’ living standards in old age and channel long-term savings 

17 Savings and Investments Union, COM(2025) 124 final. 

11 

 
 
 
into productive investment, thereby helping to improve access to finance and strengthen Member 
States’ competitiveness.  

At EU level, several initiatives launched under the Savings and Investments Union strategy 
also aim to improve the flow of savings into investment. The Recommendation on increasing 
the  availability  of  savings  and  investment  accounts  with  simplified  and  advantageous  tax 
treatment (18) and the Communication on a financial literacy strategy for the EU (19) map out a 
clear  strategy  to  promote  greater  retail  investor  participation  in  capital  markets.  The 
Communication on enhancing the capacity of the EU supplementary pension sector to improve 
retirement  income  and  supply  long-term  capital  to  the  EU  economy  ( 20)  aims  to  mobilising 
Europe’s  pension  funds’  assets  to  expand  financing  options  for  all  firms.  Lastly,  the  market 
integration  and  supervision  package  ( 21)  adopted  in  December  2025  seeks  to  create  a  more 
integrated, efficient and competitive capital market giving people better options for growing their 
wealth and helping businesses access funding.  

Closing the innovation gap 

Some Member States took steps to boost research and innovation, as called for by the 2025 
CSRs. However, progress remains limited and uneven across EU Member States and regions. With 
R&D spending stagnating at 2.2% of GDP in 2024, the EU lags behind global leaders in R&D 
intensity such as the US (3.4% of GDP), Japan (3.4%) or South Korea (5.0%) and, since 2020, it 
has  been  overtaken  by  China  (2.6%).  Still,  positive  developments  were  recorded  in  improving 
financing conditions for start-ups and scale-ups, for example in Austria, and Greece. Progress was 
also made in facilitating technology transfer and providing incentives for innovation and research 
in  Czechia  and  Germany.  Regarding  scientific  excellence,  Ireland  took  measures  to  strengthen 
public  R&D  funding,  although  sustained  increases  are  needed,  while  Estonia  enhanced  public 
support for applied research.  

As significant shortfalls persist, the 2026 CSRs prioritise closing Europe’s innovation gap 
and  boosting  R&D  investment.  They  highlight  the  need  to:  foster  public  and  private  R&D 
investment;  strengthen  innovation  systems  by  improving  business-academia  cooperation,  the 
efficiency of public support to business innovation and access to finance; and enhance access to 
innovation,  including,  where  relevant,  in  regions  lagging  behind.  Czechia,  Spain,  France  and 
Poland  are  advised  to  deepen  knowledge  transfer,  support  innovation  uptake,  and  provide  an 
innovation-friendly  environment  for  startups  and  scaleups.  Among  innovation  frontrunners, 
Denmark is encouraged to further strengthen SME innovation, technology diffusion, and access to 
growth  financing.  In  addition  to  fostering  the  digitalisation  of  businesses,  shortages  in  some 
science,  technology,  engineering  and  mathematics  (STEM)  fields  and  of  information  and 

18 Commission Recommendation 2025/2029. 
19 COM(2025) 681 final. 
20 COM(2025) 839 final. 
21 Further development of capital market integration and supervision within the Union, COM(2025) 940 final. 

12 

 
 
 
communications  technology  specialists  in  strategic  technological  domains  should  be  further 
addressed, including by incentivising female enrolment in these disciplines. 

EU-level initiatives aim to further support efforts to close the innovation gap. These initiatives 
include  the  Startup  and  Scaleup  Strategy  (22),  including  the  launch  of  a  EUR 5 billion  Scaleup 
Europe Fund, and the envisaged European Research Area Act, which aims to strengthen (23) the 
free  circulation  of  knowledge,  researchers  and  technology,  as  well  as  the  upcoming  European 
Innovation Act, which aims to boost deployment and commercialisation of innovation (24). As part 
of the next MFF, the proposed European Competitiveness Fund will mobilise private capital at 
scale. Through a close connection with Horizon Europe, it will support investment at all stages 
from  research  and  innovation,  through  scale  up  and  industrial  deployment,  to  manufacturing. 
Member  States  should  accelerate  the  uptake  of  artificial  intelligence  and  other  cutting-edge 
technologies such as quantum, cloud, high-performance computing, in line with the Apply AI (25) 
and  the  AI  Continent  Action  Plan  (26).  Together  with  the  deployment  of  AI  Factories  and  AI 
Gigafactories, the forthcoming Chips Act 2 and the Cloud and AI Development Act, will mobilise 
critical  computing,  data  and  infrastructure  capacity  and  talent  to  secure  Europe’s  leadership  in 
artificial intelligence and frontier technologies. Finally, Important Projects of Common European 
Interest (IPCEIs) are a powerful State aid instrument for cross-border projects driving innovation 
and fostering European competitiveness.  

 Delivering simple and digital public services 

Modest progress has been made in reducing administrative burdens and modernising public 
administration.  Some  positive  developments  include  streamlined  permitting  procedures  and 
improved  regulatory  impact  assessments.  Digitalisation  and  modernisation  of  public  services, 
including justice systems, has advanced in several Member States, while progress has stalled in 
others, for example due to project delays (e.g. in Cyprus). Reforms of public administration were 
also  undertaken in  several  Member States, for instance Greece’s civil  service digital upskilling 
programmes.  

Therefore,  the  proposed  2026  CSRs  call  on  Member  States  to  increase  administrative 
efficiency, reduce administrative burdens, and foster digital public services. Belgium, Croatia 
and Spain, for example, are called upon to speed up the issuing of construction, environmental and 
business  permits.  Addressing  overlapping  competencies,  pursuing  regulatory  simplification  at 
national,  regional and local  level  and improving coordination across those levels  would  reduce 
administrative  burdens  on  people,  businesses  and  administration, 
fostering 
competitiveness  and  innovation. Digitalising public administration  requires  not  only improving 
the  provision  and  interoperability  of  digital  public  services,  e.g.  in  Germany  and  Bulgaria  and 

thereby 

22 The EU Startup and Scaleup Strategy, COM(2025) 270 final. 
23 European Research Area (ERA) Act. 
24 European Innovation Act. 
25 Apply AI Strategy | Shaping Europe’s digital future. 
26 The AI Continent Action Plan | Shaping Europe’s digital future 

13 

 
 
 
guarantee equal digital access to the justice system and other public services across regions and 
investing in the digital skills of civil servants. To increase civil service capacity, there is also a 
need to improve governance and coordination including at local level, for example Croatia. The 
quality of law-making can be improved by strengthening impact assessments, ensuring stakeholder 
consultations and reducing the use of emergency ordinances, for example in Romania.  

At EU level, the Commission has set out measures to ensure that new EU initiatives avoid 
regulatory complexity and fragmentation. The ‘simplicity by design’ principles outlined in its 
Communication  on  a  simpler,  clearer  and  better  enforced  EU  rulebook  ( 27 )  are  particularly 
noteworthy.  At  the  same  time,  the  Commission  continues  to  tackle  duplications  and 
inconsistencies in the existing body of legislation, including through the Action Plan on Regulatory 
Deep Cleaning. This dual-track approach, together with the underlying principles and measures, 
also provides useful guidance for equally ambitious action at national, regional, and local level. In 
2025,  the  Commission  tabled  ten  omnibus  and  other  proposals,  bringing  administrative  cost 
savings  of  EUR 15  billion  annually  and  approximately  EUR 6  billion  in  one-off  cost  savings. 
Additionally,  the  proposal  for  an  EU  Inc.  corporate  legal  framework  which  would  provide 
businesses  with  a  unified  set  of  rules  across  the  EU  calls  on  Member  States  to  prioritise  the 
digitalisation  and  cross-border  availability  of  key  business  procedures  under  the  single  digital 
gateway (28). 

Making the most of the single market  

There  has  been  some  progress  in  reducing  single  market  barriers  and  strengthening 
institutional  quality,  though  progress  remains  limited  and  uneven  across  Member  States. 
Progress in reducing single market barriers and ensuring effective competition remains limited; 
some  measures  have  been  taken  to  strengthen  sectoral  regulation,  reduce  entry  barriers  and 
improve  coordination,  for  example  in  Italy  and  Spain.  Late  payments  are  distorting  the  Single 
Market, hampering SMEs’ growth and eroding supply chains’ competitiveness by reducing access 
to  finance,  and  stifling  innovation.  Cyprus  has  made  some  advancement  in  improving  the 
governance  of  state-owned  enterprises  by  adopting  an  action  plan  aligned  with  international 
recommendations.  In  public  procurement,  despite  several  implemented  measures,  a  number  of, 
Member States e.g. Poland and Bulgaria, continue to face challenges related to limited competition 
and efficiency of procedures, in particular for smaller tenders where bidder participation remains 
low. Some measures have been taken to improve the efficiency of the justice system, as part of the 
recovery  and  resilience  plans,  for  example  in  Italy,  Spain  and  Greece,  through  organisational 
reforms, improved digital capabilities and training. 

Deepening the single market, including by reducing gold-plating of EU legislation, is a top 
priority for the EU, and the European Semester has a role to play. This year’s CSR proposals 
include more references to country-specific barriers to the single market, complementing existing 
single market enforcement and monitoring instruments. The aim is to identify, based on available 

27 A Simpler, Clearer and Better Enforced EU Rulebook, COM(2026) 380 final. 
28 Regulation (EU) No 1024/2012. 

14 

 
 
 
evidence, concrete, country-specific obstacles with  a cross-border dimension that affect  market 
entry,  the  free  movement  of  goods  and  services,  and  the  overall  business  environment.  The 
Commission will further deepen its analysis of single market barriers and gold-plating that increase 
the  regulatory  burden  and  compliance  costs  for  businesses  and  hamper  intra-EU  business 
dynamics (29). 

The 2026 CSRs are geared to lifting restrictions to the single market, strengthening the rule 
of law, and ensuring an effective institutional framework. Regulatory restrictions on certain 
professions and on services markets continue to create barriers to the cross-border provision of 
services,  for  example  in  Luxembourg  and  Austria.  Measures  are  also  called  for  to  simplify 
regulatory frameworks, reduce gold-plating,  and lower administrative burdens  affecting market 
entry  and  cross-border  activity.  Further  action  on  regulatory  simplification  and  reducing 
compliance costs is called for in Bulgaria, Spain, Croatia, Slovakia, Austria, Germany, and Cyprus 
among others. Ensuring a predictable and fair regulatory framework, strengthening anti-corruption 
measures  and  fostering  a  dynamic  and  innovative  business  environment  are  key  priorities  for 
Hungary, Bulgaria  and Slovakia. In parallel,  several  Member States including  Croatia, Cyprus, 
Malta  and  Italy,  are  recommended  to  improve  the  effectiveness  of  justice  systems,  notably  by 
reducing case backlog and shortening the length of court proceedings.  

The EU is taking action to further strengthen the single market. Examples include the One 
Europe, One Market roadmap, which sets specific targets for legislative proposals, for example 
the  upcoming  European  Product  Act  to  modernise  product  rules  while  ensuring  stronger 
compliance across borders. The forthcoming Fair Labour Mobility Package will include the Skills 
Portability Initiative and a European Social Security Pass and will strengthen the European Labour 
Authority  to  better  enforce  the  rules.  Further  examples  include  the  proposal  for  an  EU  Inc. 
corporate legal framework, covering the entire lifecycle of a company, and the Digital Networks 
Act,  designed  to  modernise  and  harmonise  telecommunications  rules  and  strengthen  Europe’s 
digital resilience. The ongoing reform of the EU public procurement directives further simplifies 
the  legal  framework  for  public  procurement.  Completing  the  trans-European  transport  network 
(TEN-T) and its European Transport Corridors is essential to ensure the free movement of people 
and goods within the single market, foster the EU's industrial competitiveness and enhance military 
mobility. 

Accelerating an affordable clean energy transition and decarbonisation  

On decarbonisation, energy, environment and climate adaptation, progress has been uneven 
but, in some cases, notable progress has been made in aligning with EU objectives. Positive 
developments include accelerated renewable energy deployment, such as Ireland’s offshore wind 
auctions and  Lithuania’s  solar capacity expansion. Heating decarbonisation has  progressed; for 
example, subsidies  for installing fossil fuel  boilers  have been ended  across  the EU. The Dutch 

29 Communication of the Commission on A Simpler, Clearer and Better Enforced EU Rulebook, 28 April 2026. 

15 

 
 
 
Energy  Act  enables  more  flexible  grid  use  in  the  Netherlands,  while  sustainable  agriculture 
initiatives  have  begun  addressing  greenhouse  gas  emissions,  pollution,  biodiversity  loss  and 
ecosystem degradation. In transport, electrification and alternative fuels are gaining traction, with 
support for electric transport and Germany’s rail infrastructure investments. Positive steps on water 
and  resource  management  were  taken,  including  Spain’s  adoption  of  drought  resilience  plans, 
Greece’s  implementation  of  the  water  service  providers’  reform,  and  Portugal’s  adoption  of  a 
circular economy action plan.  

The 2026 CSRs aim to accelerate the clean energy transition to make energy more affordable, 
enhance  security,  support  competitiveness,  and  align  with  the  2030  climate  and  energy 
targets.  Member  States  in  which  fossil  fuels  still  represent  a  significant  part  of  the  electricity 
generation  mix,  for  instance,  Czechia,  Bulgaria  and  Hungary,  need  to  scale  up  clean  energy, 
particularly wind. For these and other Member States there is a need to accelerate and streamline 
grid permitting procedures and to upgrade grid infrastructure including cross-border connections 
and supporting the transition of regions highly dependent on fossil fuels. Several Member States 
including Croatia, Malta and Portugal are encouraged to prioritise energy efficiency and phase out 
fossil fuel subsidies that neither tackle energy poverty in a targeted way nor address genuine energy 
security concerns, that hinder electrification and that are not crucial for industrial competitiveness. 
Several Member States such as Germany, France, Spain, Portugal, Ireland, Cyprus and Latvia need 
to invest in energy system flexibility, grid capacity, and energy storage. Rolling out smart meters 
is an important prerequisite to fostering demand side flexibility and should be prioritised in several 
countries, for example Croatia and Germany. Several Member States, including Slovakia, Greece 
and Poland would benefit from reducing the relatively high taxation of electricity compared with 
fossil  fuels,  in  order  to  incentivise  electrification  effectively,  while  France  is  encouraged  to 
accelerate electrification in high-emitting sectors. Support should be provided to regions that are 
facing industrial transition challenges, including in Austria and Poland. 

including 

Transport  decarbonisation  requires  electrification, 
the  roll-out  of  recharging 
infrastructure,  and  a  modal  shift,  in  particular  by  strengthening  public  and  rail  transport.  In 
particular,  coordinated  action  between  the  EU,  Member  States  and  industry  is  encouraged  to 
accelerate the deployment of truck charging infrastructure at locations along the two heavily used 
TEN-T corridors of the North Sea-Baltic and Scandinavian-Mediterranean. Member States also 
need  to  encourage  and  support  the  decarbonisation  of  manufacturing,  in  particular  in  energy-
intensive sectors. For example, Germany and Croatia are asked to improve permitting related to 
clean industry facilities. Poland needs to decarbonise transport, Bulgaria is encouraged to promote 
the roll-out of clean transport, and Romania is asked to increase public transport connectivity of 
remote and rural areas. 

Regarding water resilience and resource management, Member States including the Netherlands, 
and Malta are called upon to improve water quality and prevent excessive water use. France is 
encouraged  to  strengthen  water  management  to  address  competing  demands  between  water-
intensive  sectors  and  safeguard  water  quality.  Others,  including  Spain,  Lithuania,  Greece,  and 

16 

 
 
Denmark  are  recommended to  strengthen waste  management  and promote a  circular economy. 
Several Member States including Spain, Slovenia, Slovakia, and Cyprus are advised to implement 
their climate adaptation measures, including nature-based solutions and strengthened governance 
systems.  It  is  recommended  that  Spain  improve the  management  of  its  forests,  while  Portugal, 
Malta and Romania need to increase the resilience of their infrastructure. In addition, social equity 
must  be  addressed  by  taking  further  measures  to  tackle  energy  poverty  and  support  vulnerable 
households, for example in Slovakia and Bulgaria. Romania and Italy are encouraged to accelerate 
investments in environmental infrastructure, in particular in the less developed regions. 

Major  EU  initiatives  strengthen  climate  resilience  and  support  the  energy  transition  to 
preserve the competitiveness of the European economy across sectors. As part of the European 
Grids  Package  (30),  the  Commission  is  addressing  the  most  urgent  energy  infrastructure  needs, 
including  interconnectors,  via  the  Energy  Highways  initiative.  The  forthcoming  European 
Integrated Framework for Climate Resilience should support the ability of Member States to tackle 
the growing impacts of climate change and strengthen the preparedness and risk management. The 
Communication  on  Integrated  Wildfire  Risk  Management  (31)  specifically  focuses  on  wildfire 
prevention, preparedness, responses and recovery. The Circular Economy Act, in line with the EU 
Bioeconomy Strategy (32), will support industries in replacing virgin fossil materials with circular 
and bio-based ones. Supporting the fisheries and aquaculture sectors through the Energy Transition 
Partnership will be key to enhancing the sector‘s resilience. Building on the EU Strategy on Small 
Modular Reactors (SMRs), interested Member States are encouraged to contribute to creating the 
enabling conditions for SMRs development in the EU and facilitate deployment in the early 2030s. 

Promoting skills, education and quality jobs  

There has been some improvement in the functioning of labour markets and boosting human 
capital  development,  but  further  action  is  needed  to  strengthen  Europe’s  competitiveness 
and productivity. Progress has been made, for instance, in improving employment opportunities 
by strengthening active labour market policies (ALMP) in some Member States. In Croatia, the 
Job+ Programme supports labour market integration of groups in situations of vulnerability, and 
Slovenia has adopted an effective framework for active employment policy measures. Incentives 
to  work  have been  strengthened  by changes  to the tax and benefit framework.  For example, in 
Belgium, the duration of unemployment benefits has been limited to two years for most jobseekers, 
while strengthening ALMP and providing support to vulnerable groups. Vocational education and 
training (VET) programmes have been expanded, for instance in Bulgaria and Spain. Initiatives to 
boost  STEM  education  and  adult  learning  were  launched,  such  as  Finland’s  digital  continuous 
learning  initiatives  for  adults.  Access  to  early  childhood  education  and  care  services  has  been 
improved in several Member States, also with the support of EU funds.  

30 European Grids Package, COM(2025) 1005 final. 
31 Communication on integrated wildfire risk management, COM(2026) 330 final. 
32 Communication on A Strategic Framework for a Competitive and Sustainable EU Bioeconomy COM (2025) 960 final. 

17 

 
 
 
The  2026  CSRs  call  on  Member  States  to  promote  quality  employment,  improve  the 
functioning of labour markets and foster skills development, including the development of 
digital skills, through quality education and training, with a view to increasing productivity 
and fostering a resilient social market economy. Improving educational outcomes and better 
aligning people’s skills with labour market needs remain key priorities, also to address labour and 
skills shortages which are particularly acute in strategic sectors such as cybersecurity, quantum, 
artificial intelligence and semiconductors. For several Member States, it is key to boost skills levels, 
for instance, by strengthening basic skills and tackling early school leaving  (Spain), promoting 
enrolment  in  STEM  and  improving  the  labour  market  relevance  of  training  (France),  and 
expanding  upskilling  and  reskilling  opportunities  for  low-skilled  and  older  adults  (Estonia  and 
Latvia).  Some  Member  States  are  called  to  improve  their  VET  systems  or  leverage  skills 
intelligence tools to future-proof their education and training systems. Several Member States, for 
example  Greece,  Sweden,  Lithuania,  Romania,  Croatia  and  Slovenia, are  encouraged  to tackle 
labour shortages, including by strengthening ALMP; supporting the labour market integration of 
underrepresented groups, such as persons with disabilities, younger and older people, people with 
a migrant background and Roma; or, where relevant, by better attracting and retaining talent from 
outside  the  EU.  Addressing  labour  market  segmentation  remains  important  in  Poland  and  the 
Netherlands. Expanding the provision of quality early childhood education and care, for example 
across  all  regions  in  Austria,  remains  important  to  foster  equal  opportunities  for  children  and 
women’s  participation  in  the  labour  market.  The  participation  of  older  workers  needs  to  be 
enhanced  for  instance  in  Luxembourg  and  Germany,  with  a  view  to  increasing  the  effective 
retirement  age.  Social  dialogue  and  collective  bargaining,  as  recommended  for  instance  to 
Hungary  and  Italy  remain  key  tools  for  addressing  labour  market  challenges  and  fostering 
economic and social resilience. 

Various key initiatives at EU level aim to support Member States in fostering quality jobs 
and skills development. The Quality Jobs Roadmap (33) and the forthcoming Quality Jobs Act 
guide Member States in ensuring that quality employment can act as an enabler for a competitive 
social market economy. As announced in the Union of Skills (34), the Commission will present a 
European  VET  Strategy  in  2026  to  help  VET  systems  respond  to  changing  market  needs.  The 
STEM Education Strategic Plan (35) reinforces this ambition by supporting participation in STEM 
studies, especially among girls and women. The Council recommendation on human capital in the 
EU  ( 36 )  calls  on  Member  States  to  strengthen  basic  skills  as  a  solid  foundation  for  skills 
development, prioritise STEM at all levels of education, boost public and private investment and 
make better use of skills intelligence, with a view to tackling skills shortages. Building also on the 
Action Plan on Basic Skills37, the forthcoming Education Package will help struggling learners 
improve  basic  skills,  support  schools  and  teachers,  and  boost  cross-border  school  cooperation. 

33 Quality Jobs Roadmap, COM(2025) 944 final. 
34 Union of Skills, COM(2025) 90 final. 
35 STEM Education Strategic Plan, COM(2025) 89 final. 
36 Council Recommendation 6081/1/26.  
37Action Plan on Basic Skills, COM(2025) 88 final. 

18 

 
 
 
Through the Digital Europe Programme (38), the EU is significantly investing in building advanced 
digital skills in all Member States. 

Social fairness  

The implementation of the 2025 CSRs shows some progress in areas such as pensions and 
healthcare, among others. Social protection and inclusion policies have  progressed in  several 
areas,  including  the  extension  of  coverage  to  all  workers  and  self-employed  people,  pension 
reforms to improve adequacy and sustainability, healthcare digitalisation, and investment in long-
term care. Adjustments to the minimum wage in Slovenia have improved income fairness, while 
pension system  changes in  Belgium  have  strengthened sustainability and  those in Croatia have 
improved its adequacy, though further progress is often still needed.  

The 2026 CSRs call on Member States to address existing and emerging challenges in the 
area of social fairness, including as identified through the Social Convergence Framework 
(see box 3). In several  Member States, boosting social inclusion and  reducing poverty requires 
stronger  pathways  to  the  labour  market  as  well  as  better  outreach,  targeting  and  adequacy  of 
minimum  income  schemes,  including  for  older  people.  Improving  access  to  social  services  is 
equally essential, both to support those experiencing poverty and to prevent others from falling 
into it. These services also play a key role in guiding people towards education, training, healthcare, 
and other essential services, including energy. Several Member States, including Spain, Romania 
and Greece, need to improve the effectiveness of social protection, for instance by revisiting its 
coverage. Improving access to and affordability of healthcare and long-term care remains a priority 
in,  for  example,  Czechia,  Estonia  and  Romania  and  in  depopulating  and  rural  regions  of  some 
Member States. Addressing persistent access and affordability challenges while maintaining cost-
effectiveness  and  fiscal  sustainability  requires  tackling  workforce  shortages  and  addressing 
territorial disparities in several Member States, such as Spain and Portugal.  

EU  initiatives  have  established  a  comprehensive  framework  to  improve  social  fairness, 
support poverty reduction, and strengthen social inclusion across the EU. With the EU Anti-
Poverty Strategy (39), the Commission supports eradication of poverty in the EU by 2050 through 
a comprehensive approach. The strategy is complemented by measures to strengthen the European 
Child  Guarantee  ( 40)  to  break  the  cycle  of  child  poverty.  Through  robust  equality  and  non-
discrimination policies, the EU promotes social fairness and leaves no one behind, in line with the 
Union of Equality Strategies (41).  

38 Conclusions on European Competitiveness in the Digital Decade - Council Conclusions (5 December 2025). Adopted alongside 
this  Spring  Package,  the  2026  State  of  the  Digital  Decade  report  provides  a  comprehensive  picture  of  the  EU’s  digitalisation, 
identifies the structural gaps to be closed by 2030 and sets out horizontal and country-specific recommendations to guide reforms 
and investments over the next programming period. 
39 SWD(2026) 770 final. 
40 SWD(2026) 772 final. 
41 See European Commission,  Union of Equality  strategies: gender equality strategies (2020–2025 and 2026–2030), LGBTIQ+ 
equality strategies (2020–2025 and 2026–2030), EU anti-racism action plan 2020–2025, EU anti-racism strategy 2026-2030, EU 
Roma strategic framework 2020–2030 and strategy for the rights of persons with disabilities 2021–2030. 

19 

 
 
 
Increasing the affordability of housing 

To tackle the ongoing crisis in housing affordability, ambitious reforms at the appropriate 
levels of government are crucial for increasing housing supply, streamlining administrative 
procedures,  and  tackling  capacity  constraints  in  residential  construction.  There  has  been 
progress in implementing the 2025 CSRs on housing, but it remains limited. Positive developments 
include increasing housing construction in several Member States and tackling capacity constraints. 
Some Member States have expanded in particular the supply of social and affordable housing, with 
initiatives including Denmark’s comprehensive housing package, and Ireland’s plans to expand 
social housing supply. However, significant challenges persist across Member States, including 
the need to simplify and speed up planning and permitting procedures, severe housing shortages 
particularly in urban areas and touristic regions, rising homelessness and declining affordability, 
constraints on labour and educational mobility, and increasing inequalities. 

Recognising the scale of the challenge and seeking to boost access to affordable, sustainable 
and  quality  housing,  including  social  housing,  the  Commission  is  proposing  several 
additional CSRs. Easing housing supply constraints requires reforms in many Member States to 
simplify rules and procedures for example to facilitate and accelerate permitting, for instance in 
the  Netherlands  and  Germany.  Action  is  also  needed  to  bring  public  land  into  use,  boost  the 
construction and renovation of affordable, energy-efficient and sustainable homes, and strengthen 
coordination across various levels of governance, for instance in Poland. Improving affordability 
also  requires  making  taxation  frameworks  more  effective,  for  example  in  Sweden,  as  well  as 
repurposing underutilised stock, for instance in Portugal. Social housing needs should be addressed 
through  adequate  investments,  for  instance  in  Spain  and  Lithuania.  Without  decisive  action, 
housing shortages and inequalities will further undermine economic competitiveness and social 
cohesion, in particular in regions and cities most acutely affected. 

Coordinated  EU-level  action,  with  full  regard  for  the  subsidiarity  principle,  can  play  a 
supporting role in addressing the housing crisis. The European Affordable Housing Plan (42), 
adopted  in  December  2025,  and  related  initiatives  such  as  the  European  Strategy  for  Housing 
Construction (43), the New European Bauhaus (44), the revision of State aid rules on housing and 
the  proposal  for  a  Council  Recommendation  on  fighting  housing  exclusion  ( 45 ),  provide  a 
framework  for  joint  action.  Additional  initiatives  and  measures,  including  the  forthcoming 
Affordable  Housing  Act,  a  simplification  package  on  housing  in  2027,  and  a  pan-European 
investment platform involving major financial institutions, aim to scale up investment and address 
market challenges such as the mismatch between housing supply and demand. Member States are 
encouraged to implement ambitious and comprehensive reforms to enhance housing affordability, 
including by facilitating construction and renovation, making full use of the data-sharing, mutual-

42 European Affordable Housing Plan, COM(2025) 1025 final. 
43 The European Strategy for Housing Construction, COM(2025) 911 final. 
44 New European Bauhaus, COM(2025) 1026 final. 
45 Proposal for a Council Recommendation on fighting housing exclusion, COM(2026) 540 final. 

20 

 
 
 
learning  and  technical  assistance  opportunities  available  at  EU  level,  including  within  the 
European Housing Alliance. At least EUR 43 billion is mobilised under the current Multiannual 
Financial  Framework,  to  support  affordable  and  sustainable  housing  efforts  with  an  additional 
EUR 3.3 billion in cohesion policy resources re-programmed towards this objective as part of the 
mid-term  review,  complemented  also  by  support  from  the  Social  Climate  Fund  notably  for 
vulnerable households and small businesses. Under the Strategy for Housing Construction (46), the 
EU, Member States and industry are encouraged to continue working hand in hand to identify and 
implement key investment and reform measures needed to scale-up the EU-wide offsite housing 
construction industry. 

Economic, social and territorial cohesion 

The  implementation  of  the  2025  CSRs  on  cohesion  shows  partial  progress  in  reducing 
territorial disparities and strengthening regional and local administration governance. Sub-
national governance reforms have advanced in some Member States, improving service delivery, 
while local public services have been strengthened, also through further digitalisation. However, 
persistent challenges, such as the still unequal access to infrastructures and services, further deepen 
economic  and  social  disparities  across  regions  and  between  urban  and  rural  areas.  Insufficient 
administrative  capacity,  insufficient  coordination  across  administrative  levels  and  slow  digital 
uptake in local governments further hinder efficient delivery of public services, which undermines 
economic, social and territorial cohesion.  

The 2026 CSRs focus on regional competitiveness, strengthening sub-national governance, 
and ensuring access to key services. Sub-national governance in certain Member States would 
benefit from better coordination across levels of government and from advancing the digitalisation 
of  public  administration at  local  level.  For  instance,  stronger  coordination  between  central  and 
local administrations would be warranted in areas such as climate resilience and housing to ensure 
effective implementation of policy actions for example in Poland, Spain and Czechia. Reducing 
the urban-rural divide also demands better access to public services, for example in Ireland and 
Lithuania, as well as improved connectivity of remote regions (e.g. Bulgaria). Finally, in the area 
of innovation it is particularly important to take into account regional specificities (Croatia, the 
Netherlands, Poland, Romania).  

The EU is taking action to tackle key challenges specific to certain territories to ensure the 
right to stay. The EU Agenda for Cities (47) is strengthening multilevel governance through more 
regular dialogues with local authorities to better integrate their needs into EU policymaking, while 
the Vision for Agriculture and Food (48) focuses on improving the living standards in rural areas. 
Estonia,  Latvia,  Lithuania,  Poland  and  Finland  are  recommended  to  address  the  unique  socio-
economic, security and civil preparedness challenges faced by the regions on the EU’s external 

46 The European Strategy for Housing Construction, COM(2025) 911 final. 
47 An EU Agenda for Cities, COM(2025) 739 final. 
48 A vision for Agriculture and Food, COM(2025) 75 final. 

21 

 
 
 
eastern border, in line with the Commission’s recently adopted Strategy for Eastern border regions 
(49). The specific challenges and pressures affecting livelihoods and the socio-economic fabric in 
outermost  regions,  as  well  as  islands  and  coastal  areas  will  be  further  addressed  in  dedicated 
strategies and supported by the European Ocean Pact (50). The upcoming EU Sustainable Tourism 
Strategy  will  focus  on  tackling  unbalanced  tourism,  promoting  sustainable  practices  and 
strengthening the sector’s global competitiveness, encouraging action at national and sub-national 
level. Finally, the Commission will also put forward a strategy to ensure that all Europeans have 
the  right  to  stay  in  their  home  region,  focusing  on  the  key  challenges  underlying  the  growing 
demographic decline of some European regions. 

Box  3:  Analysis  of  upward  social  convergence  in  line  with  the  Social  Convergence 
Framework 

The Commission has assessed the existence of challenges to upward social convergence in 
nine Member States in line with the Social Convergence Framework (SCF), which entails a 
two-stage country-specific analysis of risks and challenges to upward social convergence (51). 
In the first-stage analysis, presented in the 2026 Joint Employment Report (52), labour market, 
skills and social policies were analysed for all Member States. A total of nine Member States 
were identified as facing potential risks to upward social convergence. A second-stage analysis 
for these nine countries was published on 21 April 2026 (53). This analysis examined in more 
detail  the  available  quantitative  and  qualitative  evidence  and  the  key  factors  driving  the 
challenges, taking into account policy developments. A major challenge in all Member States is 
reducing  poverty  and  social  exclusion,  in  particular  enhancing  the  effectiveness  of  social 
transfers in reducing poverty. Many Member States are struggling with high shares of young 
people not in employment, education or training, low levels of adult learning and basic digital 
skills,  and  high  rates  of  early  school  leaving.  Further  efforts  are  needed  to  better  integrate 
underrepresented groups into education and training, as well as the labour market. Overall, the 
second-stage analysis identified challenges to upward social convergence in six Member States. 
The analysis of upward social convergence points to cross-cutting challenges in all three 
policy areas. While labour markets remain strong overall, the analysis highlights the need to 
foster  quality  job  creation  and  transitions,  including  by  integrating  inactive  people  into  the 
labour market more effectively. The analysis also points to further measures to boost quality 
education and skills acquisition to address skills gaps and mismatches. At the same time, income 
inequality and poverty risks require very close policy attention, also against the background of 
demographic and fiscal challenges, while keeping to efficient, adequate and sustainable social 
protection and inclusion systems.  

49  Communication  on  the  EU’s  eastern  regions  bordering  Russia,  Belarus  and  Ukraine  Strong  regions  for  a  safe  Europe, 
COM(2026) 82 final. 
50 The European Ocean Pact - Oceans and fisheries - European Commission. 
51 See Regulation (EU) 2024/1263, Article 3 and the underlying recital.  
52 Joint Employment Report 2026, as adopted by the EPSCO Council on 9 March 2026. 
53 SWD(2026)122 – Second-stage country analysis on social convergence in line with the Social Convergence Framework (SCF), 
2026. 

22 

 
 
 
 
 
The findings of the social convergence analysis are  reflected in the country reports and 
inform the 2026 European Semester. This analysis has fed into the multilateral surveillance 
reviews in the relevant committees of the Council. 

Box 4: RRF closure: a turning point for EU funding, powered by reforms 
The  RRF,  the  centrepiece  of  the  NextGenerationEU  response  to  the  COVID-19  pandemic, 
mobilised a substantial volume of EU financing tied to complementary reforms and investments 
that  respond  both  to  national-specific  challenges  and  common  EU  priorities.  With  payments 
linked to fulfilling milestones and targets that track progress with those reforms and investments, 
the RRF design has reshaped the effectiveness and synergies of EU funding instruments, and 
policy coordination, including notably under the European Semester. 
Across  the  EU,  the  facility  has  supported  ambitious  reform  agendas,  often  addressing  long-
standing structural challenges in a wide variety of areas. These include: 

• 

labour  market  and  skills  reforms,  such  as  modernising  employment  protection 
frameworks, strengthening active labour market policies, and improving education and 
training systems to foster quality and inclusiveness and ensure that people have the skills 
needed for the labour market (e.g. Italy, Greece, Luxembourg, Romania) 

•  pension and social protection reforms, to enhance sustainability and adequacy (e.g. 

Belgium, Greece, Romania, Slovenia, Croatia) 

•  reforms  strengthening  health  and  long-term  care  systems  to  improve  primary 
healthcare and prevention, and address the needs of an ageing population (e.g. Slovakia, 
Lithuania, Austria, Estonia) 

•  public  administration  and  justice  reforms,  including  the  digitalisation  of  public 
services  and  measures  to  improve  judicial  efficiency  (e.g.  Italy,  Croatia,  Slovakia, 
Greece, Spain, Bulgaria, Romania) 

• 

•  business  environment  reforms,  such  as  reducing  administrative  burdens,  improving 
insolvency frameworks, and facilitating access to finance (e.g. Portugal, Cyprus, Latvia 
research and innovation reforms, such as strengthening the public research landscape, 
revising R&D tax incentives for companies, and reforming R&I governance (e.g. Spain, 
Croatia, Slovakia, Lithuania) 
tax  and  fiscal-structural  reforms,  broadening  or  shifting  tax  bases,  tackling  tax 
evasion, and strengthening public financial management (e.g. Italy, Spain, Bulgaria) 
•  energy market, climate mitigation and environmentally friendly reforms, including 
through  REPowerEU,  supporting  the  deployment  of  renewables,  improving  energy 
efficiency,  and  reducing  dependence  on  fossil  fuels  (e.g.  Germany,  Czechia,  Poland, 
Latvia, Finland, Luxembourg); and  

• 

•  housing reforms, strengthening affordability by facilitating permitting procedures for 
construction,  creating  the  conditions  for  energy  renovations  and  creating  support 
schemes for social housing (e.g. Poland, Slovenia, Ireland, Spain) 

23 

 
 
 
 
 
 
APPENDIX  1  –  OVERVIEW  OF  THEMATIC  AREAS  COVERED  IN  THE  COUNTRY-SPECIFIC  RECOMMENDATIONS

24 

 
 
 
APPENDIX 2 - PROGRESS ON CSR IMPLEMENTATION 

The  2026  European  Semester  takes  stock  of  the  Member  States’  policy  action  to  address 
structural challenges identified in the country-specific recommendations (CSRs) adopted in 
2025.  The  2026  assessment  of  CSRs  implementation  considers  the  policy  action  taken  by  the 
Member States to date (54). It takes into account in particular the measures taken as part of the 
implementation of the RRF, commitments undertaken in the RRPs as well as the medium-term 
fiscal structural plans, depending on their degree of implementation. The assessment reflects the 
current stage of implementation, rather than the level of progress that could be achieved assuming 
full implementation of the plans (55). The 2026 CSR assessment covers the assessment of 2025 
CSRs (annual assessment)(56). 

Figure 1: Current level of implementation 
of 2025 CSRs 

Figure 2: Implementation of 2019-2025 
CSRs: annual assessment in each 
consecutive year 

Full Implementation; 3%

No Progress; 
8%

Substantial 
Progress; 7%

Limited 
Progress; 
42%

Some 
Progress; 
40%

Note: The annual assessment in Figure 1 shows the progress recorded in the first year after 
CSRs adoption. To be noted that 2021 CSRs only relate to fiscal policy. 

Overall,  there  has  been  good  progress  in  the  implementation  of  CSRs  adopted  in  2025. 
Member States have made at least “some progress” in 50% of the recommendations addressed to 
them  in  July  2025  (Figure  1).  This  represents  a  broadly  stable  level  compared  to  the  annual 
progress  achieved in  June 2025 on the CSRs adopted in  October 2024. Considering  the policy 

54 Including policy action reported during the European Semester missions, in the CSR database, in the annual progress reports, as 
well as in the RRF reporting (biannual reporting on progress in the implementation of milestones and targets and resulting from 
the payment request assessment). 
55 Measures foreseen in the annexes of the adopted Council Implementing Decisions on the approval of the assessment of the RRPs 
or  on  the  approval  of  the  medium-term  fiscal  structural  plans  and  which  have  not  yet  been  adopted  or  implemented  but  are 
considered as credibly announced in line with the CSR assessment methodology, warrant “limited progress”.  
56 The 2025 CSRs provided, for each Member State, a consolidated set of recommendations on which further policy actions are 
needed, based on a review of the outstanding stock of 2019-2024 CSRs, taking into consideration their coverage in the RRPs and 
their continued relevance.  

25 

0%10%20%30%40%50%60%70%80%90%100%201920202022202320242025Annual assessment in year +1Average of annual assessments 2019 -2025 
 
 
 
 
 
 
 
areas under which a significant number of Member States received a recommendation in 2025, 
progress  has  been  achieved  in  particular  on  private  sector  debt  and  insolvency  framework,  on 
budgetary framework and fiscal governance, followed by digital connectivity, infrastructures and 
market  functioning  and  wage  setting.  By  contrast,  less  progress  has  been  made  in  addressing 
recommendations on financial services and financial stability, quality of law making and state-
owned enterprises.  

The results of the 2025 CSR assessment, together with those of previous years, is available on the 
Commission website. 

26 

 
 
 
 
APPENDIX 3 – EU-WIDE PROGRESS ON SDG IMPLEMENTATION 

Note: The figure above shows the pace at which the EU has progressed towards each of the 17 goals over the most 
recent 5-or 6-year period of available data, avoiding 2020 as a base year due to COVID-related outliers. The method 
for assessing indicators and aggregating them at the goal-level, as well as more detailed analyses are available on 
the Eurostat website: Overview - Sustainable development indicators - Eurostat (europa.eu) 

27 

 
 
 
How has the EU progressed towards the SDGs? 

The overview arrow visually summarises the EU progress towards each of the 17 goals. Over the 
short-term period, the EU has made significant progress towards five  SDGs: ‘Decent work and 
economic  growth’  (SDG  8),  ‘Responsible  consumption  and  production’  (SDG  12),  ‘Reduced 
inequalities’ (SDG 10), ‘Gender equality’ (SDG 5) and ‘Quality education’ (SDG 4). The EU has 
also progressed towards nine other SDGs, but at a moderate pace. Among these goals, the EU has 
performed best for ‘Industry, innovation and infrastructure’ (SDG 9) and ‘Zero hunger’ (SDG 2). 
By contrast, no progress was observed for ‘Partnerships for the goals’ (SDG 17). Moreover, the 
EU  has  moved  away  from  the  sustainable  development  objectives  of  ’Life  on  land’  (SDG  15) 
and ’Clean water and sanitation’ (SDG 6) due to biodiversity loss, water scarcity and deteriorating 
water quality. In summary, the EU has made progress towards most SDGs, at varying paces and 
despite remaining challenges, while it has stagnated on SDG 17 and fallen back on SDG 6 and 
SDG 15. 

28 

 
 
 
 
APPENDIX  4  -  MIP  -  FINDINGS  OF  IN-DEPTH  REVIEWS  OF  MACROECONOMIC 
IMBALANCES IN MEMBER STATES 

Imbalances or excessive imbalances have been identified in four out of the seven Member 
States for which an in-depth review was carried out. The in-depth review analysis looked at the 
gravity of the vulnerabilities, their recent evolution and prospects, and related policy responses, 
which are the three criteria for the classification of macroeconomic imbalances.  

The paragraphs below review the most relevant vulnerabilities at this juncture, with a focus 
first on cross-country developments and then in the seven Member States subject to an in-
depth review this year. 

Inflation  has  declined  further  across  most  of  the  euro  area  and  the  EU,  but  significant 
inflation differentials  persist in several  Member States and increases in energy prices are 
now contributing to a resurgence of inflation. While inflation slowed further in 2025 and early 
2026, some countries, both within and outside the euro area, have continued to record markedly 
above-average inflation. However, even after accounting for the fact that part of those differentials 
reflects  rises  in  indirect  taxation,  inflation  divergences  have  widened,  including  where  the 
economic activity has been subdued. Looking ahead, the disinflation process appears increasingly 
at risk, and a further widening of inflation differentials cannot be excluded. At the same time, unit 
labour cost growth moderated in the past year, in some cases significantly, owing to slower wage 
growth  and  amid  limited  productivity  gains.  It  however  remains  elevated  relative  to  peers  in 
several  countries.  Persistent  divergences  in  costs  and  prices  may  undermine  competitiveness, 
particularly in countries that have already experienced larger cost and price competitiveness losses 
and  record  more  fragile  external  positions.  Moreover,  entrenched  inflation  differentials  risk 
weakening the effectiveness of the common monetary policy. 

Current account positions improved in 2025, but concerns persist over large deficits, and 
latest rises in energy price can worsen current accounts. Somewhat stronger exports growth, 
together with falls in energy prices, helped in narrowing the large current account deficits in 2025. 
Yet,  some  countries  still  have  current  account  deficits  significantly  higher  than  what  the 
fundamentals of their economies would justify. In some of the Member States subject to an IDR, 
large government deficits account for much of the economy’s external financing needs, while in 
others  domestic  demand  buoyancy  is  the  main  cause.  Meanwhile,  significant  current  account 
surpluses have shrunk somewhat, even if remaining elevated, thanks to faster domestic demand 
growth compared to the rest of the euro area. Looking ahead, higher energy prices could hamper 
or even reverse improvements in external accounts. Trade growth is also expected to slow down 
compared to 2025, limiting further gains in trade balances and making them more dependent on 
shifts in domestic demand. 

The more negative net international  investment positions often improved further in 2025, 
but by less than before and that progress may soon reverse as current account deficits keep 

29 

 
 
accumulating. Despite the significant current account deficits, most of those positions improved 
further  in  2025  on  account  of  nominal  GDP  growth  –  even  if  those  denominator  effects  were 
somewhat milder than in earlier years – and accelerating capital transfers. However, if those very 
large current account deficits remain, negative net international investment positions could worsen. 
Large positive positions declined in 2025, largely reflecting adverse valuation effects but are set 
to rise if large surpluses persist. 

House prices accelerated further in 2025 after a small  rebound in 2024. Demand has been 
boosted by increases in household real income and more supportive financing conditions, while 
supply has remained constrained or even shrunk in some areas. Overvaluation risks grew in various 
countries. Dysfunctional rental markets have not changed much, and certain policies, including 
taxation  policies  incentivising  debt-financed  home  buying,  continue  fuelling  demand  in  some 
countries. House prices are expected to keep rising, as housing shortages are increasing amid slow 
progress in addressing supply bottlenecks.  

Borrowing by households and non-financial corporations has picked up with lower interest 
rates,  whereas  high  debt  ratios  declined  less  than  in  previous  years.  Denominator  effects 
became less significant on account of lower nominal GDP growth which led to more limited falls 
in  debt  ratios  than  in  earlier  years.  In  the  Member  States  with  high  private  debt  ratios,  the 
slowdown in deleveraging has been often more pronounced in the case of households. The recent 
tightening  of  financing  conditions  may  dampen  borrowing  and  increase  debt  service  burdens 
especially where variable-rates loans are widespread.  

Government  debt  ratios  have  evolved  diversely,  sometimes  declining  but  often  increasing 
depending  on  budget  balances,  while  interest  rates  are  now  increasing  everywhere.  High 
government debt ratios decreased in one country subject to an in-depth review but edged up in 
other  cases.  Lower  growth  weakened  debt  dynamics  too.  Looking  forward,  sizeable,  even  if 
declining, large deficits are forecast to continue adding to debt ratios in a number of cases. In 2025, 
borrowing conditions improved for euro area government debts, but long-term interest rates were 
much unchanged for non-euro area Members, where borrowing in foreign currencies is significant 
too. Since this March, however, government bond yields have risen across various maturities. 

The banking sector has remained healthy. Capital ratios have increased slightly further in 2025. 
Bank  profitability  has  remained  elevated  despite  the  decreasing  contribution  of  the  net  interest 
income. Non-performing loans have been broadly stable and close to historical lows on aggregate, 
with  limited  further  reductions  in  Member  States  where  they  used  to  be  elevated  and  some 
marginal  increases  in  some  cases.  At  the  same  time,  non-performing  loans  held  by  servicers 
outside the banking sector remain large in some Member States and their workout remains slow. 
Commercial real estate remains a source of vulnerability in some cases, but financing pressures 
have eased. Banks continue to hold large exposures to domestic sovereign debt in some Member 
States, which have increased further in some cases.  

30 

 
 
Table 1: MEMBER STATES CLASSIFICATION UNDER THE MIP  

2025 outcomes 

2026 outcomes 

No imbalances 

CY, DE, EE 

EL, NL, SE 

Imbalances 

EL, HU, IT, NL, SE, SK 

HU, IT, SK 

Excessive 
imbalances 

RO 

RO 

p.m.: No IDR 

AT, BE, BG, CZ, DK, ES, FI, FR, HR, IE, LT, 
LU, LV, MT, PL, PT, SI 

AT, BE, BG, CY, CZ, DE, DK, EE, ES, FI, 
FR, HR, IE, LT, LU, LV, MT, PL, PT, SI 

Note: Member States with classification changed between 2025 and 2026 are marked in bold in both columns. 

Member States no longer experiencing imbalances 

Greece is no longer experiencing imbalances. Vulnerabilities related to government and external 
debt have receded over recent years, supported by steady GDP growth, with budgetary surpluses 
further contributing to decreases in government debt; banks’ non-performing loans have declined 
and balance sheets have improved; the current account deficit remains sizeable but its favourable 
financing  mitigates  external  sustainability  risks;  Greece  has  implemented  relevant  reforms  to 
reduce its long-standing vulnerabilities. While remaining high, the government debt-to-GDP ratio 
has continued to decrease due to prudent fiscal policy and GDP growth, which has also supported 
an improvement of the negative net international investment position. Both government debt and 
external debt ratios are expected to fall further. The current account deficit has remained elevated 
and  is  not  expected  to  improve  this  year,  but  EU  financing  and  private  non-debt-generating 
financing  are  expected  to  cover  a  large  share  of  it.  The  labour  market  has  improved,  with  the 
unemployment rate decreasing further. Over the past years, banks have cleaned up their balance 
sheets. The workout of non-performing loans held by servicers outside the banking sector remains 
slow though. Overall policy progress has been strong and addressing the main vulnerabilities, with 
the government taking a broad range of measures to improve the business environment, the labour 
market, and tax administration. Looking ahead, sticking to sound fiscal policies would help further 
reductions  in  government  debt  and  while  structural  challenges  related  to  labour  productivity 
remain, the European Semester will provide the framework for monitoring progress in structural 
reforms.  

The Netherlands is no longer experiencing imbalances. 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 

31 

 
 
  
 
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. 

Sweden is no longer experiencing imbalances. Vulnerabilities related to its real estate market and 
high  levels  of  private  debt  remain  but  their  gravity  has  lessened  recently.  While  the  Swedish 
economy is highly sensitive to interest rates due to the widespread use of variable-rate mortgages, 
it proved resilient to the higher interest rates in 2022 and 2023, which caused house prices to drop. 
Since  then,  house  prices  have  been  stable  and  seem  less  overvalued  than  before.  The  large 
commercial real estate sector showed signs of improved refinancing capacity as interest rates eased 
and capital market access improved. Household debt as a share of GDP, which had been falling 
since the pandemic, levelled off in 2025 and is expected to stay steady. Going forward, housing 
shortages, coupled with looser borrower requirements, could push house prices and household debt 
up.  Banks  remain  strong,  profitable,  and  with  low  non-performing  loans.  Some  measures  have 
recently been taken aimed at making the rental market more flexible, and the regulatory framework 
for  building  permits  was  tweaked  in  late  2025.  Looking  ahead,  effectively  increasing  housing 
supply and tackling tax incentives favouring debt-financed house buying, together with judicious 
use  of  macroprudential  measures,  would  help  further  dampen  house  price  growth  and  reduce 
household  debt  in  a  lasting  way.  The  European  Semester  will  provide  the  framework  for 
monitoring progress on housing reforms. 

Member States experiencing imbalances 

Italy  continues  to  experience  imbalances.  Vulnerabilities  related  to  high  government  debt  and 
weak productivity growth, which have cross-border relevance, persist, and continued and effective 
implementation  of  growth-enhancing  reforms  and  investments,  together  with  a  prudent  fiscal 
stance, remains crucial to reduce those vulnerabilities. Government debt as a share of GDP fell 
after the pandemic but increased in 2024 and again in 2025, on account of the slowdown in nominal 
GDP growth, the lagged impact of the tax credits for housing renovations of earlier years, and the 

32 

 
 
still sizeable government deficits. The government debt ratio is expected to continue increasing in 
2026 and 2027. Productivity has declined recently and is forecast to stagnate, limiting potential 
GDP  growth  and  hence  hampering  reductions  in  the  government  debt  ratio.  Banks  have 
significantly strengthened their asset quality and profitability and reduced their non-performing 
loans,  but  the  high  sovereign-banks  nexus  is  still  a  concern,  as  banks’  holdings  of  domestic 
government debt as a share of their assets is high, especially for less significant institutions and 
cooperative banks. The labour market has continued to improve, but the labour potential does not 
seem to be fully exploited. Measures have been taken to address the long-standing vulnerabilities 
but,  despite  the  recent  extensive  reform  action,  significant  productivity  gains  have  yet  to 
materialise. Looking ahead, continued and effective implementation of growth-enhancing reforms 
and investments,  together with  a prudent  fiscal  stance, remains crucial  to  improve productivity 
growth and reduce the government debt-to-GDP ratio.  

Hungary  continues  to  experience  imbalances.  Vulnerabilities  related  to  competitiveness, 
government financing needs, and house prices persist, and policies have continued compounding 
those vulnerabilities. Inflation and unit labour costs growth have been among the highest in the 
EU  despite  stagnating  economic  activity.  Price  and  cost  pressures  are  expected  to  ease  only 
gradually, while remaining much higher than in the euro area and EU. Government deficits have 
been elevated in the past years and are not forecast to improve. Government financing needs and 
debt  servicing  costs  remain  high,  although  the  government  debt-to-GDP  ratio  has  risen  only 
marginally thanks to the high nominal GDP growth in the context of still elevated inflation. Banks 
continue  to  hold  large  sovereign  exposures,  partly  reflecting  tax  incentives.  House  prices  have 
continued  to  increase  strongly  and  risks  of  overvaluation  have  risen.  The  current  account  has 
remained in surplus, but Hungary’s high reliance on energy imports makes it vulnerable to higher 
and more volatile energy prices. Policies have not improved and have compounded some of the 
vulnerabilities. Untargeted subsidies that add to price pressures and compound fiscal challenges 
have even been stepped up, while extensive government subsidised lending strain public finances 
and  limit  the  effectiveness  of  monetary  policy.  Looking  ahead,  effectively  overcoming  those 
policies would reduce vulnerabilities. 

Slovakia  continues  to  experience  imbalances.  Vulnerabilities  related  to  the  external  and 
government balances, competitiveness, the housing market, and household debt persist, with policy 
action  remaining  limited.  While  the  current  account  deficit  narrowed  in  2025  thanks  to  lower 
energy prices and stronger exports, it is expected to deteriorate in 2026 as the  external  context 
worsens. The government deficit edged down in 2025 but remains large and weighing on external 
balances; moreover, it is forecast to be largely unchanged in 2026 and to rise in 2027 assuming 
unchanged policies, pushing government debt higher. Inflation was well above the euro area in 
2025, partly due to VAT rate increases, and core inflation is forecast to stay among the highest in 
the euro area in 2026. Fast-rising unit labour costs have further weakened competitiveness and are 
still expected to grow relatively fast in 2026. House prices surged in 2025 amid lower mortgage 
rates and are likely to keep rising briskly due to constrained supply. Household borrowing grew 

33 

 
 
too with lower interest rates and higher incomes. Policy progress has been limited. Looking ahead, 
effectively addressing key issues in labour taxation, competitiveness, housing supply, and fiscal 
policy would reduce vulnerabilities. 

Member States experiencing excessive imbalances 

Romania  continues  to  experience  excessive  imbalances.  Vulnerabilities  related  to  fiscal  and 
current account deficits have diminished somewhat recently but remain very significant, while cost 
competitiveness  continues  deteriorating  albeit  less  than  before.  The  government  deficit  fell  in 
2025 as result of marked consolidation efforts; a further fall of the deficit is expected for 2026 and 
2027, but the deficit would still remain large. The bank-sovereign nexus continues to be significant 
as banks’ holdings of domestic government bonds as a share of total assets are the largest in the 
EU and increased in 2025. The current account deficit improved only marginally in 2025 and is 
forecast to remain large even if declining somewhat more this year. Unit labour costs slowed down 
markedly in 2025 after very strong growth in earlier years, but are expected to still grow faster 
than in most of the EU. Core inflation was the highest in the EU in recent years – with increases 
in VAT rates in 2025 only explaining part of it and is expected to remain high. Policy progress 
was significant in 2025, especially on reducing the budget deficit thanks to a two-year freeze of 
government  wages  and  pensions,  and  increases  in  VAT  rates  and  other  taxes.  Looking  ahead, 
without  further  vigorous  fiscal  consolidation,  complemented  by  prudent  income  policies  and 
effective  structural  reforms,  Romania  remains  exposed  to  rising  interest  rates  and  changes  in 
investor confidence. 

34 

 
 
 
 
APPENDIX 5 - FISCAL SURVEILLANCE UNDER THE REFORMED STABILITY AND 
GROWTH PACT 

Assessment by Member State (57) 

The reformed Economic Governance framework has now reached a steady state of implementation. 
By 2025, all Member States had submitted their medium-term fiscal-structural plans (henceforth, 
medium-term plans or MTPs). In 2026, following the formation of new governments, Ireland and 
the Netherlands have submitted new MTPs.  

The Annual Progress Reports (APRs) submitted by Member States at the end of April (58) take 
stock of the progress made in the implementation of these medium-term plans and the respective 
Council recommendations. Together with the Commission Spring 2026 Forecast, and outturn data 
for  2024  and  2025  provided  by  Eurostat,  the  APRs  provide  key  inputs  for  the  assessment  of 
Member  States’  compliance  with  the  recommended  fiscal  path  and,  where  relevant,  for  the 
assessment of the implementation of reforms and investments underpinning an extension of the 
fiscal adjustment period (59). 

Table 2 Overview of Member States’ compliance with the recommended net expenditure growth rates 

2026 

Projected  
compliance 

At risk of  
non-compliance 

At risk of  
material non-compliance 

BE*, AT*, PL*, RO*, 
SK*, FI*, CZ, DK, DE, 
EE, EL, FR*C, LV  
SEC 

FR*,A, ES  

HU*, SEA 

IT* 

IE  

PT  

LT, SI 

LU, NL 

MT**, BG, HR, CY 

Compliance 

2025 

Non-compliance 

Material non-compliance 

*Member States in EDP. **For Malta, the Commission recommends to the Council the abrogation of the decision 
establishing an excessive deficit.        Member States not in EDP for which, in 2025, the government deficit was 
below 3% of GDP and the debt ratio below 60% of GDP, or the government balance was close to balance or in 
surplus (60). A2026 assessment based on the annual growth rate of net expenditure. C2026 assessment based on the 
cumulative growth rate of net expenditure.  
Notes:  Where  net  expenditure  growth  is  higher  than  recommended  (i.e.  positive  deviations),  the  size  of  the 
deviation is assessed in relation to the thresholds of 0.3% of GDP in annual terms and 0.6% of GDP in cumulative 
terms. A positive deviation below one  of these thresholds entails an assessment of (a  risk of) non-compliance, 
while a deviation above one of these thresholds entails an assessment of (a risk of) material non-compliance. For 
Member  States  for  which  the  national  escape  clause  for  defence  has  been  activated,  the  assessment  takes  into 

57 See also Box 5 at the end of this Appendix. 
58  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. Hungary has to date not yet submitted its APR. 
59 This is relevant for Belgium, Germany, Spain, France, Italy, Austria, Romania and Finland. 
60 A fiscal position ‘close to balance’ is defined as a general government deficit not exceeding 0.5% of GDP, according to recital 
14 in Council Regulation (EU) 2024/1264. 

35 

 
 
 
 
 
 
 
 
 
account the corresponding flexibility and is based only on net expenditure growth in cumulative terms. For Ireland, 
the Netherlands and Finland, the assessment of 2026 is carried out against the latest recommendations, while 2025 
is assessed against their previous recommendations.  

Member States currently under EDP 

The Commission has assessed effective action for 2025 on the basis of outturn data. For 2026, the 
assessment  is  based  on  the  Commission  Spring  2026  Forecast  and  it  should  be  considered  as 
preliminary, with a reassessment to take place in autumn 2026 and in spring 2027 based on outturn 
data. A stepping-up of the excessive deficit procedure in the absence of outturn data would only 
be considered in particularly serious cases of non-compliance. A Member State that adheres to the 
corrective path should be considered as having taken effective action. When the net expenditure 
growth deviates from the corrective path, the Commission will carry out an overall assessment. 

Belgium - The net expenditure growth in 2025 is above the ceilings recommended by the Council. 
However, the corresponding cumulated deviation is within the flexibility provided by the national 
escape clause, taking into account the increase in defence spending. In 2026, both the annual and 
the cumulative growth rates of net expenditure are projected to be below the recommended ceilings. 
Therefore, after considering the flexibility provided by the national escape clause, Belgium is 
assessed to be compliant with the recommended maximum growth rate of net expenditure in 
2025 and projected to be compliant in 2026. At this stage, the Commission assesses Belgium 
as having taken effective action. As a result, the EDP is held in abeyance. 

When it comes to the set of reforms and investments underpinning the extension of the adjustment 
period,  the  Commission  finds  that  the  implementation  of  the  key  steps  of  these  reforms  and 
investments that were due by 30 April 2026 seems to be broadly on track. However, some reforms 
experience  a  delay  in  implementation.  Namely,  the  adoption  of  the  pension  reform  by  the 
Parliament, that was due in Q4-2025, is now expected in 2026. The tax reforms, due in Q1-2026, 
have been partly implemented and the remaining parts are expected to be finalized by July 2026. 
The two reforms to improve the budgetary coordination between different levels of government, 
due  in  Q4-2025,  have  been  largely  agreed  at  government  level  and  now  need  to  be  legislated, 
which is expected to be completed by the end of 2026. The Commission considers that, overall, 
Belgium has complied with its commitments in a satisfactory manner. 

France - The net expenditure growth in 2025 is below the ceilings recommended by the Council 
both  in  annual  and  cumulative  terms.  In  2026,  the  annual  net  expenditure  growth  is  above  the 
ceiling recommended by the Council whereas the cumulative net expenditure growth is below the 
recommended ceiling. Therefore, France is assessed to be compliant with the maximum growth 
rate of net expenditure in 2025. In 2026, France is projected to be at risk of non-compliance 
with the recommended annual growth rate of net expenditure in 2026, while it is projected 
to  be  compliant  with  the  cumulative  growth  rate.  At  this  stage,  the  Commission  assesses 
France as having taken effective action. As a result, the EDP is held in abeyance. At the same 

36 

 
 
 
time, on current projections, France may fall short of delivering effective action in 2026, which 
could then require a stepping up of the EDP. Hence, the Commission recommends to the Council 
to invite France to ensure that net expenditure respects the corrective path.  

When it comes to the set of reforms and investments underpinning the extension of the adjustment 
period,  the  Commission  finds  that  the  implementation  of  the  key  steps  of  these  reforms  and 
investments that were due by 30 April 2026 seems to be broadly on track. However, the recasting 
of the exemptions of social security contributions around the minimum salary has yielded lower 
savings than committed. The Commission considers that, overall, France has complied with 
its commitments in a satisfactory manner. Looking ahead, the 2023 pension reform has been 
suspended until January 2028.  

Italy - The net expenditure growth in 2025 is above the ceilings recommended by the Council both 
in  annual  and  cumulative  terms,  although  only  marginally  above  in  cumulative  terms.  The  net 
expenditure growth in 2026 is projected to be below the ceilings recommended by the Council 
both in annual and cumulative terms. Therefore, Italy is assessed to be non-compliant with the 
recommended maximum growth rate of net expenditure in  2025, but it is  projected to be 
compliant in 2026. The deviation in 2025 requires an overall assessment. Taking account of the 
decline in the nominal deficit, the projected correction of the excessive deficit situation as of 2026, 
and the small size of the deviation in 2025,  the Commission considers Italy as  having taken 
effective action. As a result, the EDP is held in abeyance. At the same time, the Commission 
recommends to the Council to invite Italy to ensure that net expenditure respects the corrective 
path.  

When it comes to the set of reforms and investments underpinning the extension of the adjustment 
period,  the  Commission  finds  that  the  implementation  of  the  key  steps  of  these  reforms  and 
investments that were due by 30 April 2026 seems to be broadly on track. With regard to the key 
step  due  by  Q4-2025  related  to  the  increase  in  public  spending  on  research  and  development 
(R&D), measured by R&D expenditure in GERD terms as a share of GDP, the latest available 
Eurostat  statistics  refer  to  2024.  Nevertheless,  preliminary  estimates  provided  by  the  Italian 
authorities indicate that R&D expenditure in GERD terms is expected to have reached 0.59% of 
GDP  in  2025,  suggesting  that  Italy  appears  to  be  on  track  with  the  target.  The  Commission 
considers that, overall, Italy has complied with its commitments in a satisfactory manner. 

Hungary - The net expenditure growth in 2025 is above the ceilings recommended by the Council 
both in annual and cumulative terms. However, the corresponding cumulated deviation is within 
the flexibility provided by the national escape clause, taking into account the increase in defence 
spending. In 2026, both the annual and the cumulative growth rates of net expenditure are projected 
to  be  above  the  recommended  ceilings.  The  corresponding  cumulated  deviation  for  2026  is 
projected to remain above 0.6% of GDP (strong presumption of no effective action) after taking 
into account the flexibility for higher defence spending provided for by the national escape clause. 
Therefore, after considering the flexibility provided by the national escape clause, Hungary 

37 

 
 
is assessed to be compliant with the recommended maximum growth rate of net expenditure 
in 2025, whereas it is projected to be at risk of material non-compliance in 2026. At this stage, 
the Commission assesses Hungary as having taken effective action in 2025. As a result, the 
EDP is held in abeyance. At the same time, the projected risk of material non-compliance in 2026 
would entail a strong presumption of no effective action and could require a stepping up of the 
EDP.  Hence,  the  Commission  recommends  to  the  Council  to  invite  Hungary  to  take  action  to 
control net expenditure so that it respects the corrective path. Furthermore, there is a clear risk 
that Hungary will not correct the excessive deficit by 2026 (61), which is the final year of the 
corrective path. Therefore, there will be a need for the Commission to recommend to the Council 
to  adopt  a  revised  recommendation  under  Article  126(7)  to  establish  a  corrective  path  for  the 
subsequent years (62). The Commission will monitor this situation closely and reassess the situation 
in autumn. 

Austria - The net expenditure growth in 2025 is below the ceilings recommended by the Council. 
Similarly, in 2026, net expenditure growth is projected to be below the ceilings recommended by 
the Council both in annual and cumulative terms. Therefore, Austria is assessed to be compliant 
with the recommended maximum growth rate of net expenditure in 2025, and it is projected 
to  be  compliant  in  2026.  At  this  stage,  the  Commission  assesses  Austria  as  having  taken 
effective action. As a result, the EDP is held in abeyance.  

When it comes to the set of reforms and investments underpinning the extension of the adjustment 
period,  the  Commission  finds  that  the  implementation  of  the  key  steps  of  these  reforms  and 
investments  that  were  due  by  30  April  2026  seems  to  be  broadly  on  track.  The  Commission 
considers that, overall, Austria has complied with its commitments in a satisfactory manner. 

Malta – Malta successfully reduced its general government deficit to below 3% of GDP in 2025, 
in advance of the deadline that the Council had established. Based on the Commission Spring 2026 
Forecast, the deficit is projected to remain below 3% of GDP also in 2026 and 2027. Therefore, 
the  Commission  is  today  recommending  to  the  Council  to  adopt  a  decision  under  Article 
126(12)  to  abrogate  the  Council  decision  of  26  July  2024  on  the  existence  of  an  excessive 
deficit in Malta. 

At the same time, the Commission notes that the Council recommendation of 21 January 2025 that 
endorsed  the  medium-term  plan  of  Malta  continues  to  apply.  Compared  to  the  latter 
recommendation, the annual growth rate of net expenditure in 2025 was below the recommended 
ceiling, whereas it was above in cumulative terms, with the deviation above 0.6% of GDP. In 2026, 
the net expenditure growth is projected to be above the ceilings recommended by the Council both 
in annual and cumulative terms with the corresponding deviation in cumulative terms projected to 

61 Based on data provided by Eurostat, Hungary’s general government deficit decreased from 5.1% of GDP in 2024 to 4.7% of 
GDP in 2025. Based on policy measures known by the cut-off date of the forecast, the Commission Spring 2026 Forecast projects 
a deficit of 6.2% of GDP in 2026 and 5.8% of GDP in 2027. 
62 On 1 June 2026, Hungary informed the Commission about its intention to submit a revised national medium-term fiscal-structural 
plan. 

38 

 
 
 
be above 0.6% of GDP (63). Therefore, Malta is assessed to be materially non-compliant with the 
recommended  maximum  growth  rate  of  net  expenditure  in  2025  and  projected  to  be  at  risk  of 
material non-compliance in 2026. Hence, the Commission recommends to the Council to invite 
Malta  to  take  action  to  control  net  expenditure  so  that  it  respects  the  recommended  maximum 
growth rates. 

Poland - The net expenditure growth in 2025 is above the ceilings recommended by the Council 
both in annual and cumulative terms. However, the corresponding cumulated deviation is within 
the flexibility provided by the national escape clause, taking into account the increase in defence 
spending.  In  2026,  the  annual  growth  rate  of  net  expenditure  is  projected  to  be  below  the 
recommended ceiling,  whereas cumulative net  expenditure growth  is  projected to  be above the 
recommended ceiling. However, the cumulated deviation is projected to be within the flexibility 
provided  by  the  national  escape  clause  based  on  current  projections  for  defence  spending. 
Therefore, after considering the flexibility provided by the national escape clause, Poland is 
assessed to be compliant with the recommended maximum growth rate of net expenditure in 
2025,  and  it  is  projected  to  be  compliant  in  2026.  At  this  stage,  the  Commission  assesses 
Poland as having taken effective action. As a result, the EDP is held in abeyance. 

Romania - The net expenditure growth in 2025 is below the ceilings recommended by the Council, 
thanks to the large fiscal policy packages adopted in the second half of 2025. Similarly, in 2026, 
net expenditure growth is projected to be below the ceilings recommended by the Council both in 
annual  and  cumulative  terms.  Therefore,  Romania  is  assessed  to  be  compliant  with  the 
recommended maximum growth rate of net expenditure in  2025, and it is projected to be 
compliant in 2026. At this stage, the Commission assesses Romania as having taken effective 
action. As a result, the EDP is held in abeyance. At the same time, the Commission stresses that 
the fiscal situation in Romania remains fragile with the largest 2025 deficit ratio in the Union and 
where there are serious implementation risks which require a strong and persistent focus on fiscal 
adjustment in 2026 and subsequent years.  

When it comes to the set of reforms and investments underpinning the extension of the adjustment 
period,  the  Commission  finds  that  the  implementation  of  the  key  steps  of  these  reforms  and 
investments that were due by 30 April 2026 seems to be broadly on track. Preparatory work on the 
reform of the public sector remuneration system is ongoing at technical level, and a new Law is 
expected to be adopted in the course of the summer 2026. Some further measures need to be taken 
in the field of tax administration, in particular with a view to reducing Romania’s very high VAT 
compliance  gap.  Further  work  is  also  ongoing  on  the  property  taxation  reform,  including  the 
development  of the  IT system for automated property assessment, the operationalisation of the 

63 The decrease in the deficit in 2025 reflects high revenue growth, including from corporate and indirect taxation, mainly driven 
by the expansion of nominal GDP and tax bases, as well as significant tax windfalls. On the other hand, notwithstanding the non-
repetition  of  a  sizeable  capital  transfer  granted  to  the  national  airline  company  in  2024,  government  expenditure  continued  to 
increase significantly, with substantial increases in the government’s wage bill and intermediate consumption, as well as a one-off 
expenditure arising from a court decision. 

39 

 
 
 
specialised structure for monitoring public expenditure systems, and the business financing reform. 
The  Commission  considers  that,  overall,  Romania  complied  with  its  commitments  in  a 
satisfactory manner.   

Slovakia - The net expenditure growth in 2025 is below the ceilings recommended by the Council 
in  both  annual  and  cumulative  terms.  In  2026,  the  annual  growth  rate  of  net  expenditure  is 
projected to be above the recommended ceiling, whereas the cumulative one is projected below. 
Therefore, after considering the flexibility provided by the national escape clause, Slovakia is 
assessed to be compliant with the recommended maximum growth rate of net expenditure in 
2025,  and  it  is  projected  to  be  compliant  in  2026.  At  this  stage,  the  Commission  assesses 
Slovakia as having taken effective action. As a result, the EDP is held in abeyance. 

Finland - Compliance with the net expenditure growth in 2025 is assessed based on the Council 
recommendation of 21 January 2025, whereas for 2026 the relevant Council recommendation is 
the one of 20 January 2026. For Finland, the net expenditure growth in 2025 is below the ceilings 
recommended by the Council in both annual and cumulative terms. Differently, the net expenditure 
growth in 2026 is projected to be above the ceilings recommended by the Council both in annual 
and cumulative terms. However, the cumulated deviation is within the flexibility provided by the 
national  escape  clause  based  on  current  projections  for  defence  spending.  Therefore,  after 
considering the flexibility provided by the national escape clause, Finland is assessed to be 
compliant with the recommended maximum growth rate of net expenditure in 2025, and it 
is projected to be compliant in 2026. At this stage, the Commission assesses Finland as having 
taken effective action. As a result, the EDP is held in abeyance.  

When it comes to the set of reforms and investments underpinning the extension of the adjustment 
period,  the  Commission  finds  that  the  implementation  of  the  key  steps  of  these  reforms  and 
investments that were due by 30 April 2026 seem to be broadly on track. As regards the correction 
of  deficits  of  the  wellbeing  services  counties,  although  expenditure  growth  has  moderated,  the 
accumulated deficits of some counties are considered too large to be corrected by the end of 2026 
without  jeopardising  service  provision.  The  government  has  therefore  presented  a  proposal  to 
extend the deadline to the end of 2029 for those regions with credible plans to address the deficit. 
The Commission considers that, overall, Finland has complied with its commitments in a 
satisfactory manner. 

Other Member States  

Bulgaria  - The government  deficit in  Bulgaria exceeded the reference value of 3% of GDP in 
2025,  and  the  Commission  projects  the  deficit  in  2026  at  4.1%.  Therefore,  Bulgaria  has  been 
included in the report under Article 126(3) TFEU assessing compliance with the deficit criterion. 
In particular, while the deficit was below 3% of GDP in 2025 when accounting for the increase in 
defence expenditure since 2024 under the National Escape Clause for defence, it is projected to 

40 

 
 
 
exceed the 3% of GDP reference value in 2026 when accounting for this increase, based on the 
Commission  Spring  2026  Forecast.  Taking  into  account  the  Opinion  of  the  Economic  and 
Financial  Committee  on  that  report,  the  Commission  will  consider  proposing  to  open  an 
excessive deficit procedure for Bulgaria. 

For  Bulgaria,  the  net  expenditure  growth  in  2025  is  above  the  ceilings  recommended  by  the 
Council. The corresponding cumulated deviation remains above 0.6% of GDP after taking into 
account the flexibility for higher defence spending provided for by the national escape clause. In 
2026, the growth rate of net expenditure is projected to be above the recommended ceiling both in 
annual and cumulative terms. The corresponding cumulated deviation is projected to remain above 
0.6% of GDP after taking into account the flexibility for higher defence spending provided for by 
the national escape clause. Therefore, after considering the flexibility provided by the national 
escape clause, Bulgaria is assessed to be materially non-compliant with the recommended 
maximum growth rate of net expenditure in 2025 and is projected to be at risk of material 
non-compliance in 2026. Hence, the Commission recommends to the Council to invite Bulgaria 
to adhere to the maximum growth rates of net expenditure that the Commission assumes will be 
recommended by the Council, with a view to bringing an end to the situation of an excessive deficit. 

Czechia - The annual net expenditure growth in 2025 is above the ceiling recommended by the 
Council, whereas the cumulative net expenditure growth is below the recommended ceiling.  In 
2026, the annual net expenditure growth is projected to be above the ceiling recommended by the 
Council  whereas  the  cumulative  net  expenditure  growth  is  projected  below  the  recommended 
ceiling, with a deviation of 0.1% of GDP in cumulative terms. However, the projected cumulated 
deviation is within the flexibility of the national escape clause based on current projections for 
defence spending. Therefore, after considering the flexibility provided by the national escape 
clause, Czechia is assessed to be compliant with the recommended maximum growth rate of 
net expenditure in 2025 and is projected to be compliant in 2026 (64). 

Denmark - The annual net expenditure growth in 2025 is above the ceiling recommended by the 
Council, whereas the cumulative net expenditure growth is below the recommended ceiling.  In 
2026, the annual net expenditure growth is projected to be above the ceiling recommended by the 
Council  whereas  the  cumulative  net  expenditure  growth  is  projected  below  the  recommended 
ceiling.  Therefore,  after  considering  the  flexibility  provided  by  the  national  escape  clause, 
Denmark is assessed to be compliant with the recommended maximum growth rate of net 
expenditure in 2025, and it is projected to be compliant in 2026. 

Germany - The net expenditure growth in 2025 is below the ceilings recommended by the Council. 
The net  expenditure growth in  2026 is  projected to  be above the ceilings recommended by the 
Council  both  in  annual  and  cumulative  terms.  However,  the  projected  deviation  in  cumulative 
terms  in  2026  is  within the  flexibility  provided by  the  national  escape  clause  based  on  current 

64 On  12 May 2026,  Czechia  informed  the  Commission  about  its  intention  to  submit  a  revised  national  medium-term  fiscal-
structural plan. 

41 

 
 
 
projections for defence spending. Therefore, after considering the flexibility provided by the 
national  escape  clause,  Germany  is  assessed  to  be  compliant  with  the  recommended 
maximum growth rate of net expenditure in 2025, and it is projected to be compliant in 2026. 

Due to the planned general government deficit above the 3% of GDP deficit reference value in 
2026,  Germany  has  been  assessed  in  the  report  under  Article  126(3)  TFEU.  In  light  of  the 
assessment in that report, the Commission is of the view that there is no case to open an excessive 
deficit  procedure  for  Germany.  Fiscal  developments  in  Germany  will  be  reassessed  in  autumn 
2026. 

When it comes to the set of reforms and investments underpinning the extension of the adjustment 
period,  the  Commission  finds  that  the  implementation  of  the  key  steps  of  these  reforms  and 
investments  that  were  due  by  30 April 2026  seems  to  be  broadly  on  track.  The  Commission 
considers  that,  overall,  Germany  has  complied  with  its  commitments  in  a  satisfactory 
manner. 

Estonia - The net expenditure growth in 2025 is below the ceilings recommended by the Council 
both in annual and cumulative terms. However, the net expenditure growth in 2026 is projected to 
be above the ceilings recommended by the Council both in annual and cumulative terms. Although 
most of the increase in defence spending in Estonia took place in previous years, the projected 
deviation  in  cumulative  terms  in  2026  is  within  the  flexibility  provided by  the  national  escape 
clause  based  on  current  projections  for  defence  spending.  Therefore,  after  considering  the 
flexibility provided by the national escape clause, Estonia is assessed to be  compliant with 
the recommended maximum growth rate of net expenditure in 2025, and it is projected to be 
compliant in 2026. 

Due to the planned general government deficit above the 3% of GDP deficit reference value in 
2026, Estonia has been assessed in the report under Article 126(3) TFEU. In light of the assessment 
in that report, the Commission is of the view that there is no case to open an excessive deficit 
procedure for Estonia. Fiscal developments in Estonia will be reassessed in autumn 2026. 

Ireland - Compliance with the net expenditure growth in 2025 is assessed based on the Council 
recommendation of 21 January 2025, whereas for 2026 the relevant Council recommendation is 
the  one  of  10 March 2026.  The  annual  net  expenditure  growth  in  2025  is  above  the  ceiling 
recommended by the Council on 21 January 2025, and the corresponding deviation is marginally 
above 0.3% of GDP, while the cumulative net expenditure growth rate is below the recommended 
ceiling. In 2026, both the annual and cumulative growth rates of net expenditure are projected to 
be below the ceilings recommended by the Council in its recommendation of 10 March 2026. At 
the same time, the Commission notes that the budgetary position in 2025 is in surplus and projected 
to be in surplus also in 2026. Therefore, Ireland is deemed to be compliant with the budgetary 
policy obligations of the Stability and Growth Pact in 2025 and it is projected to be compliant 
in  2026. Hence, the Commission  recommends to the Council to  invite Ireland to  adhere to  the 
maximum growth rates of net expenditure recommended by the Council on 10 March 2026. 

42 

 
 
Greece - The net expenditure growth in 2025 is below the ceilings recommended by the Council 
both in annual and cumulative terms. Meanwhile, net expenditure growth in 2026 is projected to 
be above the ceilings recommended by the Council both in annual and cumulative terms. However, 
the  projected  deviation  in  cumulative  terms  in  2026  is  within  the  flexibility  provided  by  the 
national  escape  clause  based  on  current  projections  for  defence  spending.  Therefore,  after 
considering the flexibility provided by the national escape clause,  Greece is assessed to be 
compliant with the recommended maximum growth rate of net expenditure in 2025, and it 
is projected to remain compliant in 2026. 

Spain - The net expenditure growth in 2025 is above the ceilings recommended by the Council 
both in annual and cumulative terms. However, the cumulated deviation is within the flexibility 
provided by the national escape clause65 based on current estimates for defence spending. The net 
expenditure growth in 2026 is projected to be above the ceilings recommended by the Council 
both in annual and cumulative terms. The corresponding cumulated deviation reduces to below the 
0.6%  of  GDP  threshold  after  taking  into  account  the  flexibility  for  higher  defence  spending 
provided for by the national escape clause. Therefore, after considering the flexibility provided 
by the national escape clause, Spain is assessed to be compliant with the maximum growth 
rate of net expenditure in 2025 and projected to be at risk of non-compliance in 2026. Hence, 
the Commission recommends to the Council to invite Spain to ensure that net expenditure respects 
the recommended maximum growth rates.  

When it comes to the set of reforms and investments underpinning the extension of the adjustment 
period,  the  Commission  finds  that  the  implementation  of  the  key  steps  of  these  reforms  and 
investments that were due by 30 April 2026 seems to be broadly on track. The tax reform is still 
being  assessed  and  the  tax  benefits  reform,  along  with  two  steps  related  to  the  digital 
transformation of education will be assessed under the last payment of the RRP. As regards the 
measures to  improve the management of temporary disability, partnership agreements with  the 
National  Social  Security  Institute  were  signed  by  most  regions  whereas  the  agreements  with 
mutual societies have only been signed by three regions and two autonomous cities. Regarding the 
homologation  of  diplomas,  a  ministerial  order  has  been  adopted  and  put  in  place  setting 
instructions  for  the  management  of  homologation  and  equivalence  procedures  for  foreign 
university qualifications. The Commission considers that, overall, Spain has complied with its 
commitments in a satisfactory manner. 

Croatia - The net expenditure growth in 2025 is above the ceilings recommended by the Council 
both in annual and cumulative terms. The corresponding cumulated deviation remains above 0.6% 
of GDP after taking into account the flexibility for higher defence spending provided for by the 

65 For Spain, on 22 May 2026 the Commission has adopted a recommendation to the Council to activate the national escape clause 
for defence, which is now pending adoption by the Council. The assessment of compliance for Spain assumes that the Council will 
activate the national escape clause. 

43 

 
 
 
 
national escape clause. Similarly, the net expenditure growth in 2026 is projected to be above the 
ceilings recommended by the Council both in annual and cumulative terms. The  corresponding 
cumulated  deviation  is  projected  to  remain  above  that  threshold  after  taking  into  account  the 
flexibility for higher defence spending provided for by the national escape clause. Therefore, after 
considering the flexibility provided by the national escape clause, Croatia is assessed to be 
materially non-compliant with the recommended maximum growth rate of net expenditure 
in  2025,  and  it  is  projected  to  be  at  risk  of  material  non-compliance  in  2026.  Hence,  the 
Commission recommends to the Council to invite Croatia to take action to control net expenditure 
so that it respects the recommended maximum growth rates. At the same time, the Commission 
notes that, for Croatia, the public debt ratio is below the 60% of GDP reference value in 2025, and 
the  general  government  deficit  and  public  debt  are  projected  below  3%  and  60%  of  GDP 
respectively in 2026.  

Cyprus - The net expenditure growth in 2025 is above the ceilings recommended by the Council 
both in annual and cumulative terms. The corresponding deviations are above 0.3% of GDP and 
0.6% of GDP respectively. Similarly, the net expenditure growth in 2026 is projected to be above 
the  ceilings  recommended  by  the  Council  both  in  annual  and  cumulative  terms,  and  the 
corresponding deviations are above 0.3% of GDP and 0.6% of GDP respectively. At the same time, 
the  Commission  notes  that  the  budgetary  position  in  2025  is  in  surplus  and  projected  to  be  in 
surplus also in 2026. Therefore, Cyprus is deemed to be compliant with the budgetary policy 
obligations of the Stability and Growth Pact both in 2025 and 2026. However, net expenditure 
growth is projected to be above the recommended ceilings. Hence, the Commission recommends 
to the Council to invite Cyprus to ensure that net expenditure respects the recommended maximum 
growth rates.  

Latvia - The net expenditure growth in 2025 is below the ceilings recommended by the Council 
in  both  annual  and  cumulative  terms.  In  2026,  the  annual  net  expenditure  growth  is  above  the 
ceiling recommended by the Council, whereas the cumulative net expenditure growth is below the 
recommended  ceiling.  Therefore,  after  considering  the  flexibility  provided  by  the  national 
escape clause, Latvia is assessed to be compliant with the recommended maximum growth 
rate of net expenditure in 2025, and it is projected to be compliant in 2026.  

Due to the planned general government deficit above the 3% of GDP deficit reference value in 
2026, Latvia has been assessed in the report under Article 126(3) TFEU. In light of the assessment 
in that report, the Commission is of the view that, taking into account all the relevant factors as 
appropriate,  the  deficit  criterion  is  fulfilled  by  Latvia.  Fiscal  developments  in  Latvia  will  be 
reassessed in autumn 2026. 

Lithuania - The net expenditure growth in 2025 is above the ceilings recommended by the Council. 
The corresponding cumulated deviation reduces to below 0.6% of GDP after taking into account 
the flexibility for higher defence spending provided for by the national escape clause. Similarly, 
the  net  expenditure  growth  in  2026  is  projected  to  be  above  the  ceilings  recommended  by  the 

44 

 
 
Council both in annual and cumulative terms. The corresponding cumulated deviation in 2026 is 
projected to remain above 0.6% of GDP after taking into account the flexibility for higher defence 
spending provided for by the national escape clause. Therefore, after considering the flexibility 
provided by the national escape clause, Lithuania is assessed to be non-compliant with the 
recommended maximum growth rate of net expenditure in 2025, and it is projected to be at 
risk of material non-compliance in 2026. Therefore, the Commission recommends to the Council 
to invite Lithuania to take action to control net expenditure so that it respects the maximum growth 
rates. At the same time, the Commission notes that the general government deficit and public debt 
ratios in Lithuania are below the 3% and 60% of GDP in 2025 and projected to be so also in 2026. 

Luxembourg - The net expenditure growth in 2025 is above the ceilings recommended by the 
Council in both annual and cumulative terms, and the corresponding deviations are above 0.3% of 
GDP and 0.6% of GDP respectively. In 2026, the annual growth rate of net expenditure is projected 
to  be  below  the  recommended  ceiling,  whereas  the  cumulative  one  is  projected  above,  with  a 
corresponding deviation of less than 0.1% of GDP in cumulative terms. Therefore, Luxembourg 
is assessed to be materially non-compliant with the maximum growth rate of net expenditure 
in 2025 and projected to be at risk of non-compliance in 2026 due to a deviation in cumulative 
terms of less than 0.1% of GDP. Hence, the Commission recommends to the Council to invite 
Luxembourg  to  take  action  to  control  net  expenditure  so  that  it  respects  the  recommended 
maximum  growth  rates.  At  the  same  time,  the  Commission  notes  that  the  general  government 
deficit and public debt ratios in Luxembourg are below the 3% and 60% of GDP ratios in 2025 
and projected to be so also in 2026.  

The Netherlands -Compliance with the net expenditure growth in 2025 is assessed on the basis 
of  the  Council  recommendation  of  21 January 2025.  For  2026,  the  recommendation  which  has 
been  used  for  the  present  assessment  is  the  one  adopted  today  by  the  Commission,  pending 
adoption by the Council. In 2025, both the annual and cumulative net expenditure growth rates of 
the Netherlands are above the ceilings recommended by the Council on 21 January 2025, and the 
corresponding deviations are above 0.3% of  GDP and 0.6% of GDP respectively.  In 2026, the 
growth rate of net expenditure is projected to be above the ceiling in the recommendation for a 
Council  recommendation  endorsing  the  revised  medium-term  plan  of  the  Netherlands,  adopted 
today  by  the  Commission.  Therefore,  the  Netherlands  is  assessed  to  be  materially  non-
compliant with the recommended maximum growth rate of net expenditure in 2025, and it 
is projected to be at risk of non-compliance in 2026. Hence, the Commission recommends to 
the Council to invite the Netherlands to adhere to the maximum growth rates of net expenditure, 
which are expected to be endorsed by the Council. At the same time, the Commission notes that 
the general government deficit and public debt ratios in the Netherlands are below the 3% and 60% 
of GDP ratios in 2025 and projected to be so also in 2026.  

Portugal - The net expenditure growth in 2025 is above the ceilings recommended by the Council 
both in annual and cumulative terms. Similarly, the net expenditure growth in 2026 is projected to 
be above the ceilings recommended by the Council both in annual and cumulative terms. After 

45 

 
 
taking into account the flexibility for higher defence spending provided for by the national escape 
clause, the corresponding cumulated deviations are projected to be below 0.6% of GDP in both 
years. At the same time, the Commission notes that the budgetary position in 2025 is in surplus 
and projected to be close to balance in 2026. Therefore, Portugal is deemed to be compliant with 
the budgetary policy obligations of the Stability and Growth Pact both in 2025 and 2026. 
However, after considering the flexibility provided by the national escape clause, net expenditure 
growth is projected to be above the recommended ceilings. Hence, the Commission recommends 
to  the  Council  to  invite  Portugal  to  ensure  that  net  expenditure  respects  the  recommended 
maximum growth rates. 

Slovenia - The net expenditure growth in 2025 is above the ceilings recommended by the Council 
both in annual and cumulative terms. Similarly, the net expenditure growth in 2026 is projected to 
be above the ceilings recommended by the Council both in annual and cumulative terms. After 
taking into account the flexibility for higher defence spending provided for by the national escape 
clause, the corresponding cumulated deviations are projected to be below and above the 0.6% of 
GDP in 2025 and 2026 respectively. Therefore, after considering the flexibility provided by the 
national escape clause, Slovenia is assessed to be non-compliant with the maximum growth 
rate of net expenditure in 2025 and projected to be at risk of material non-compliance in 
2026.  Hence,  the  Commission  recommends  to  the  Council  to  invite  Slovenia  to  take  action  to 
control  net  expenditure  so  that  it  respects  the  recommended  maximum  growth  rates.  A 
confirmation of the material non-compliance based on outturn data for 2026 could trigger a report 
under Article 126(3) TFEU for the assessment of compliance with the debt criterion. 

Due to the planned general government deficit above the 3% of GDP deficit reference value in 
2026,  Slovenia  has  been  assessed  in  the  report  under  Article  126(3)  TFEU.  In  light  of  the 
assessment in that report, the Commission is of the view that there is no case to open an excessive 
deficit procedure for Slovenia at this stage. Fiscal developments in Slovenia will be reassessed in 
autumn  2026.  However,  significant  uncertainty  remains  over  the  fiscal  outlook  for  Slovenia  in 
2026. If sufficient corrective measures are not taken in a credible and timely manner, this may lead 
to the opening of the excessive deficit procedure based on the deficit criterion in autumn. 

Sweden - The net expenditure growth in 2025 is below the ceilings recommended by the Council 
in both annual and cumulative terms. In 2026, the net expenditure growth is projected to be above 
the ceiling recommended by the Council in annual terms, with the corresponding deviation being 
projected  above  0.3%  of  GDP.  However,  the  net  expenditure  growth  in  cumulative  terms  is 
projected below the recommended ceiling. Therefore, Sweden is assessed to be compliant with 
the  recommended  maximum  growth  rate  of  net  expenditure  in  2025.  In  2026,  Sweden  is 
projected to be at risk of material non-compliance with the recommended annual growth 
rate of net expenditure, while it is projected to be compliant with the cumulative growth rate. 
Hence,  the  Commission  recommends  to  the  Council  to  invite  Sweden  to  ensure  that  net 
expenditure respects the recommended maximum growth rates. At the same time, the Commission 

46 

 
 
notes that the general government deficit and public debt ratios in Sweden are below the 3% and 
60% of GDP ratios in 2025 and projected to be so also in 2026.  

47 

 
 
 
Table 3 Annual and cumulated deviations (% GDP) of net expenditure growth 

48 

  Annual and cumulated deviations (% GDP)         Annual deviation Cumulated deviation National escape clause (NEC) Reference year for NEC Cumulated deviation  taking into account flexibility from NEC                           2025 2026 2025 2026 2025 2026       (A) (B) (C) (D) (E) (F) (G) (H)                           Member States under the excessive deficit procedure                                 BE 0.1 -0.3 0.1 -0.2 Yes 2021 -0.5 -0.9     FR 0.0 0.1 -0.3 -0.2 No - - -     IT 0.1 -0.1 0.0 -0.1 No - - -     HU 1.5 2.3 0.8 3.0 Yes 2021 0.0 1.9     MT* -0.1 0.1 2.3 2.2 No - - -     AT -0.3 -0.1 -0.3 -0.4 Yes 2021 -0.4 -0.7     PL 0.9 -0.2 1.2 1.0 Yes 2021 -0.3 -0.5     RO -0.8 -0.3 -0.8 -1.0 No - - -     SK -0.9 0.8 -1.9 -1.0 Yes 2021 -2.5 -1.6     FI -1.0 1.5 -1.0 0.5 Yes 2021 -1.6 -0.9                           Other Member States                                       BG 2.1 0.2 2.1 2.2 Yes 2024 1.4 1.6     CZ 0.2 1.5 -1.4 0.1 Yes 2021 -1.7 -0.2     DK 1.0 0.4 -0.6 -0.1 Yes 2021 -1.6 -1.5     DE -0.3 0.5 -0.3 0.3 Yes 2021 -0.7 -0.5     EE -2.0 2.8 -1.4 1.5 Yes 2021 -2.9 0.0     IE -0.5 -0.1 -0.5 -0.6 No - - -     EL -0.3 1.5 -1.3 0.2 Yes 2024 -1.5 -0.2     ES^ 0.4 0.6 0.1 0.7 Yes 2024 -0.1 0.4     HR 1.8 0.3 1.4 1.6 Yes 2021 0.9 1.0     CY 1.3 0.9 1.0 1.8 No - - -     LV -0.4 1.2 -1.9 -0.6 Yes 2021 -2.6 -2.1     LT 1.5 0.7 1.5 2.2 Yes 2021 0.3 0.7     LU 1.3 -0.6 0.6 0.0 No - - -     NL - 0.1 - 0.1 No - - -     PT 0.2 0.2 0.4 0.6 Yes 2021 0.4 0.6     SI 1.4 1.2 0.5 1.7 Yes 2021 0.3 1.2     SE -0.9 1.0 -1.1 0.0 No - - -                           
 
 
 
Table 3 - continued  

49 

                        Annual and cumulated deviations (% GDP) – previous recommendations§                               Annual deviation Cumulated deviation National escape clause (NEC) Reference year for NEC Cumulated deviation  taking into account flexibility from NEC                           2025 2026 2025 2026 2025 2026       (A) (B) (C) (D) (E) (F) (G) (H)                           IE 0.3 - -0.1 - No - - -     NL 1.5 - 1.0 - No - - -     FI -1.3 - -1.5 - Yes 2021 -2.5 -              Note: A positive (negative) deviation indicates net expenditure growth exceeding (remaining below) the maxima recommended by the Council.  For Member States for which the national escape clause for defence spending has been activated, deviations above the threshold of 0.6% of GDP in columns (G) and (H) are highlighted in bold. For the rest of Member States, deviations in columns (A) to (D) are shown in bold if these are above the 0.3% of GDP (annual terms) and/or 0.6% of GDP (in cumulative terms) thresholds. Please note that the Commission assessment of compliance with the net expenditure growth is based on exact figures. In this Communication, the figures underpinning the assessment have been rounded to one decimal place for presentation purposes. *For Malta, the Commission recommends to the Council the abrogation of the decision establishing an excessive deficit.  ^ Columns (E) to (H) assume the activation of the national escape clause for defence spending. § For Ireland, the Netherlands and Finland, the assessment of 2025 is carried out against Council recommendations adopted in January 2025. Source: Commission Spring 2026 Forecast and Commission calculations   
 
 
 
 
 
 
 
 
 
 
 
 
Table 4 General government balance, debt and GDP growth

50 

    General government balance (% GDP) General government debt  (%GDP) GDP  (real growth rate)                         2025 2026 2027 2025 2026 2027 2025 2026 2027                             Member States under the excessive deficit procedure                                     BE -5.2 -5.2 -5.4 107.9 110.5 112.8 1.0 0.7 0.9     FR -5.1 -5.1 -5.7 115.6 118.1 120.2 0.8 0.8 1.1     IT -3.1 -2.9 -2.9 137.1 138.5 139.2 0.5 0.5 0.6     HU -4.7 -6.2 -5.8 74.6 75.1 76.8 0.5 1.8 2.1     MT* -2.2 -2.2 -2.1 46.4 46.2 46.2 4.0 3.7 3.6     AT -4.2 -4.1 -4.1 81.5 83.4 84.9 0.6 0.6 0.9     PL -7.3 -6.5 -6.3 59.7 64.5 68.3 3.6 3.5 2.8     RO -7.9 -6.2 -5.8 59.3 61.6 63.4 0.7 0.1 2.3     SK -4.5 -4.6 -5.4 61.4 63.7 66.9 0.8 0.8 1.5     FI -3.4 -4.5 -4.6 88.5 91.2 93.1 0.2 0.8 1.4                             Other Member States                                           BG -3.5 -4.1 -4.3 29.9 32.3 35.5 3.1 2.5 2.2     CZ -2.1 -2.8 -2.9 44.3 45.8 47.2 2.6 1.8 2.4     DK 2.9 0.9 0.5 27.9 27.0 26.2 2.9 1.9 1.8     DE -2.7 -3.7 -4.1 63.5 65.8 68.0 0.2 0.6 0.9     EE -2.0 -4.5 -4.8 24.1 26.9 30.5 0.6 1.6 1.7     IE 1.8 1.4 1.2 32.9 32.4 31.6 12.3 -1.2 3.4     EL 1.7 0.8 0.6 146.1 140.7 134.4 2.1 1.8 1.6     ES -2.4 -2.4 -2.0 100.7 99.6 98.9 2.8 2.4 1.9     HR -3.0 -2.9 -2.7 56.3 55.9 55.6 3.4 2.7 2.5     CY 3.4 2.1 2.5 55.0 50.4 45.5 3.8 2.3 2.7     LV -2.5 -3.3 -4.3 46.9 48.8 53.8 2.1 1.4 1.6     LT -1.8 -2.2 -2.7 39.5 44.6 48.4 2.9 3.0 2.1     LU -2.0 -1.2 -1.5 26.5 29.2 30.2 0.6 1.6 2.0     NL -1.6 -2.5 -1.9 44.4 46.9 47.0 1.8 1.0 1.1     PT 0.7 -0.1 -0.4 89.7 87.6 86.0 1.9 1.7 1.8     SI -2.5 -3.3 -3.5 65.7 64.9 65.1 1.1 1.9 2.3     SE -1.3 -2.8 -2.5 35.1 36.6 37.7 1.5 1.8 2.2                            *For Malta, the Commission recommends to the Council the abrogation of the decision establishing an excessive deficit. Source: Commission 2026 Spring Forecast   
 
 
Box 5 - Methodological approach underpinning the assessment of compliance 

A Member State is assessed (66) to be ‘compliant’ when the net expenditure (67) growth is within 
the  ceilings  recommended  by  the  Council.  Where  net  expenditure  growth  is  higher  than 
recommended  (i.e.  positive  deviations),  the  Commission  considers  the  size  of  the  deviation  in 
relation to the thresholds of 0.3% of GDP in annual terms (see columns (A) and (B) in Table X1X) 
and 0.6% of GDP in cumulative terms since the start of the plan (columns (C) and (D)). A positive 
deviation  below  these  thresholds  entails  an  assessment  of  (risk  of)  non-compliance,  while  a 
deviation above these thresholds entails an assessment of (risk of) material non-compliance (68). 
In its assessment of compliance based on net expenditure growth, the Commission also takes into 
account  the  overall  budgetary  position  of  a  Member  State,  in  particular  whether  it  is  close  to 
balance or in surplus. 

In Spring 2026, for the first time after the entry into force of the reformed Economic Governance 
framework, the fiscal assessment reflects the Commission’s calculation of the control account for 
each Member State based on outturn data. The control accounts keep track of deviations from the 
recommended  maximum  growth  rates  of  net  expenditure  both  in  annual  and  cumulative  terms 
since the base year of the relevant Council recommendation for each Member State. They also 
constitute the basis to monitor compliance with the Council recommendations under the excessive 
deficit procedure.  

For  the  Member  States  for  which  the  national  escape  clause  for  defence  spending  has  been 
activated (column (E)), the assessment of compliance focusses on the comparison in cumulative 
terms  and  includes  a  check  whether  any  positive  deviation  from  the  recommended  maximum 
growth of net expenditure in cumulative terms is explained by a corresponding increase in defence 
expenditure compared to a reference year (column (F)), up to 1.5% of GDP over the period 2025 
to  2028.  If  the  cumulated  deviation  can  be  explained  by  the  increase  in  defence  expenditure 
compared  to  the  reference  year  (columns  (G)  and  (H)),  the  Member  State  is  considered  to  be 
compliant.  

66 The Commission assessment of compliance with the net expenditure growth is based on exact figures from the control account. 
In this Communication, the figures underpinning the assessment have been rounded to one decimal place for presentation purposes 
(see Table 3). 
67 For an analytical presentation of the net expenditure indicator and the control account, please see the Fiscal Statistical Tables, 
which provide background data relevant for the assessment of the budgetary policies of the Member States, SWD(2026) 200 final, 
Brussels 3.6.2026. 
68 According to Regulation (EC) No 1467/97, if the general government debt of a Member State exceeds 60% of GDP, its fiscal 
position is not ‘close to balance or in surplus’ and the deviation of the net expenditure growth from the recommended ceilings 
exceeds 0.3% of GDP annually or 0.6% of GDP cumulatively, the Commission should prepare a report under Article 126(3) TFEU 
for the assessment of the debt criterion. 

51