Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Czechia for 2027-2030 and clarifying flexibility allowed under the national escape clause in 2027 and 2028
Date: 2026-07-23
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Czechia, budget deficit, coordination of EMU policies, economic reform, fiscal policy, investment, macroeconomics, national planning, public debt, structural adjustment

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   EUROPEAN COMMISSION  Brussels, 23.7.2026  COM(2026) 414 final  Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Czechia for 2027-2030  and clarifying flexibility allowed under the national escape clause in 2027 and 2028  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

endorsing the national medium-term fiscal-structural plan of Czechia for 2027-2030 

and clarifying flexibility allowed under the national escape clause in 2027 and 2028 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 121 thereof, 

Having regard to Regulation (EU) 2024/1263, and in particular Articles 17 and 26 thereof, 

Having regard to the recommendation from the Commission, 

Whereas: 

GENERAL CONSIDERATIONS 

(1) 

(2) 

The EU’s economic governance framework1 aims at promoting sound and sustainable 
public  finances  and  sustainable  and  inclusive  growth  and  resilience  through  reforms 
and  investments  and  preventing  excessive  government  deficits.  It  also  promotes 
national  ownership  and  has  a  greater  medium-term  focus,  combined  with  more 
effective and coherent enforcement of the rules. 

The  national  medium-term  fiscal-structural  plans  that  Member  States  submit  to  the 
Council  and  to  the  Commission  are  at  the  centre  of  the  economic  governance 
framework. The plans are to deliver on two objectives: i) ensuring that, inter alia, by 
the end of the adjustment period, general government debt is on a plausibly downward 
trajectory,  or  stays  at  prudent  levels,  and  that  the  government  deficit  is  brought  and 
maintained  below  the  reference  value  of  3%  of  GDP  over  the  medium  term,  and 
ii) ensuring the delivery of reforms and investments responding to the main challenges 
identified  in  the  context  of  the  European  Semester  and  addressing  the  common 
priorities  of  the  Union.  To  that  end,  each  plan  is  to  present  a  medium-term 
commitment  to  maximum  growth  rates  of  net  expenditure2,  which  effectively 
establishes  a  budgetary  constraint  for  the  duration  of  the  plan,  covering  four  or  five 
years (depending on the regular term of legislature in a Member State). In addition, the 
plan  is  to  explain  how  the  Member  State  will  ensure  the  delivery  of  reforms  and 
investments  responding  to  the  main  challenges  identified  in  the  context  of  the 

1 
Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  of  29  April  2024  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary  surveillance  (OJ  L,  2024/1263, 
30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj), together with Council Regulation (EC) No 1467/97 
of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (OJ L, 209, 
2.8.1997,  ELI:  http://data.europa.eu/eli/reg/1997/1467/2024-04-30),  and  Council  Directive  2011/85/EU  of  8 
November 2011 on requirements for budgetary frameworks of the Member States (OJ L, 306, 23.11.2011, ELI: 
http://data.europa.eu/eli/dir/2011/85/2024-04-30). 
2 
Net expenditure as defined in Article 2 of Regulation (EU) 2024/1263, namely government expenditure 
net of (i) interest expenditure, (ii) discretionary revenue measures, (iii) expenditure on Union programmes fully 
matched by revenue from Union funds, (iv) national expenditure on co-financing of programmes funded by the 
Union,  (v)  cyclical  elements  of  unemployment  benefit  expenditure  and  (vi)  one-offs  and  other  temporary 
measures.  

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European Semester, in  particular in  the country-specific recommendations (including 
those  pertaining  to  the  macroeconomic  imbalances  procedure  (MIP)),  and  how  the 
Member State intends addressing the common priorities of the Union. The period for 
fiscal adjustment covers four years, which may be extended by up to three years if the 
Member  State  commits  to  delivering  a  set  of  relevant  reforms  and  investments  that 
satisfies the criteria set out in Regulation (EU) 2024/1263. 

Following the submission of the plan, the Commission is to assess whether it complies 
with the requirements of Regulation (EU) 2024/1263. 

Upon  a  recommendation  from  the  Commission,  the  Council  is  to  then  adopt  a 
recommendation to set the maximum growth rates of net expenditure over the medium 
term  of  the  Member  State  concerned  and,  where  applicable,  to  endorse  the  set  of 
reform  and  investment  commitments  underpinning  an  extension  of  the  fiscal 
adjustment period. 

(3) 

(4) 

RELATED PROCESSES, INCLUDING THE PREVIOUSLY RECOMMENDED NET 
EXPENDITURE PATH 

(5) 

(6) 

On  21  January  2025  the  Council  adopted  a  recommendation  endorsing  the  medium-
term  fiscal-structural  plan  of  Czechia3.  On  8  July  2025,  upon  Czechia’s  request  to 
activate  the  national  escape  clause  to  accommodate  higher  defence  spending,  the 
Council adopted a recommendation4 allowing Czechia to deviate from the maximum 
growth  rates  of  net  expenditure  recommended  by  the  Council  Recommendation 
C/2025/666, for the period 2025-2028. 

On  3  June  2026,  as  part  of  the  European  Semester  Spring  2026  package,  the 
Commission  assessed  Czechia’s  compliance  with  the  maximum  growth  rates  of  net 
expenditure.5 Based on the Commission’s calculations, the cumulative growth rate of 
net  expenditure  in  2025,  i.e.  considering  2024  and  2025  together,  was  below  the 
maximum net expenditure growth recommended by the Council on 21 January 2025.   
In  2026,  the  projected  net  expenditure  growth  in  cumulative  terms  over  2024,  2025 
and  2026  exceeded  by  0.1%  of  GDP  the  recommended  maximum.  However,  the 
projected deviation is within the flexibility provided for by the national escape clause 
based  on  current  projections  for  defence  spending  (see  also  Table  3).  Accordingly, 
Czechia was assessed to be compliant with the recommended maximum growth rate of 
net expenditure in 2025 and projected to be compliant in 20266. 

(7) 

On  8  July  2025,  the  Council  addressed  to  Czechia  a  series  of  country-specific 
recommendations  (CSRs)  in  the  context  of  the  European  Semester7.  After  the 

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5 

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Council  Recommendation  of  21  January  2025  endorsing  the  medium-term  fiscal-structural  plan  of 
Czechia, OJ C, C/2025/666, 10.2.2025, ELI: http://data.europa.eu/eli/C/2025/666/oj. 
Council Recommendation of 8 July 2025 allowing Czechia to deviate from the maximum growth rates 
of net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national 
escape clause), (OJ C, C/2025/3962, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3962/oj). 
As  Czechia  benefits  from  flexibility  under  the  national  escape  clause,  the  assessment  of  compliance 
focussed  on  the  comparison  of  net  expenditure  growth  with  the  maximum  growth  rates  of  net 
expenditure as recommended by the Council in cumulative terms. 
COM(2026)  200  final  and  Commission  Staff  Working  Document  SWD(2026)200,  'Fiscal  statistical 
tables providing background data relevant for the assessment of the budgetary policies of the Member 
States', 3.6.2026. 
Council  Recommendation  on  the  economic,  social,  employment,  structural  and  budgetary  policies  of 

7 
Czechia, OJ C, C/2025/3977, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3977/oj. 

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submission of the revised national medium-term fiscal structural plan assessed in this 
Recommendation,  on  10  July  2026,  the  Council  addressed  to  Czechia  a  new  set  of 
CSRs8. 

CONSIDERATIONS  CONCERNING  THE  NATIONAL  MEDIUM-TERM  FISCAL-
STRUCTURAL PLAN OF CZECHIA  

(8) 

According to Article 15(2) of Regulation 2024/1263, in the case of a newly appointed 
government, a Member State may submit a revised medium-term fiscal-structural plan. 
Following general elections in Czechia on  3 and 4 October 2025, a new government 
was established on 15 December 2025. On 22 June 2026, Czechia submitted a revised 
national medium-term fiscal-structural plan (henceforth ‘the plan’) to the Council and 
to the Commission. The plan covers the period from 2027 until 2030. 

Process prior to the submission of the plan of June 2026  

(9) 

Prior  to  the  submission  of  its  plan,  Czechia  requested  technical  information9,  which 
the Commission provided, according to  Article 15(4) of Regulation (EU) 2024/1263, 
on 28 May 2026 and published on 22 June 202610. The technical information indicates 
the structural primary balance in 2030 that is projected to be necessary to ensure that 
the general government deficit is maintained below 3% of GDP over the medium term 
and  that  the  general  government  debt  remains  below  60%  of  GDP  over  the  medium 
term,  in  the  absence  of  further  budgetary  measures  beyond  the  4-year  adjustment 
period.  The  medium  term  is  defined  as  the  ten-year  period  after  the  end  of  the 
adjustment  period.  The  technical  information  was  prepared  and  transmitted  to  the 
Member  State  under  two  scenarios:  a  scenario  including  consistency  with  the  deficit 
resilience safeguard11, in line with Article 9(3) of Regulation (EU) 2024/1263, and a 
scenario without this safeguard. 

(10)  The  technical  information  for  Czechia  sets  out  that,  in  order  to  comply  with  the 
applicable  fiscal  rules  over  an  adjustment  period  of  four  years,  and  based  on  the 
Commission’s  assumptions,  the  structural  primary  balance  should  amount  to  at  least 
0.5% of GDP at the end of the adjustment period (2030; scenario without the deficit 

Council  Recommendation  on  the  economic,  social,  employment,  structural  and  budgetary  policies  of 

8 
Czechia, OJ C, C/2026/XXXX, XX.X.2026, ELI: http://data.europa.eu/eli/C/20XX/XXXX/oj.  
9 
Prior  guidance  transmitted  to  the  Member  States  and  Economic  and  Financial  Committee  includes 
technical  information  i)  without  and  with  an  extension  of  the  adjustment  period  (covering  4  and  7  years, 
respectively), and ii) with and without the deficit resilience safeguard. It also includes the main initial conditions 
and  underlying  assumptions  used  in  the  Commission’s  medium-term  government  debt  projection  framework. 
The technical information was calculated on the basis of the methodology described in the Commission’s  Debt 
Sustainability  Monitor  2023  (https://economy-finance.ec.europa.eu/publications/debt-sustainability-monitor-
2023_en)  and  its  subsequent  refinements  agreed  at  the  DSA  Working  Group.  It  is  based  on  the  European 
Commission Spring 2026 Forecast and its medium-term extension up to 2035, and long-term GDP growth and 
ageing  costs  are  in  line  with  the  joint  Commission-Council  2024  Ageing  Report  (https://economy-
finance.ec.europa.eu/publications/2024-ageing-report-economic-and-budgetary-projections-eu-member-states-
2022-2070_en). 
10 
including-country-reports/czechia/fiscal-surveillance-czechia_en  
11 
The deficit resilience safeguard established in Article 8 of Regulation (EU) 2024/1263 establishes that 
the annual improvement in the structural primary balance is of 0.4 percentage points of GDP (or 0.25 percentage 
points in case of an extension of the adjustment period) until the structural deficit is lower than 1.5% of GDP. 

https://economy-finance.ec.europa.eu/economic-surveillance-eu-member-states/country-pages-

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resilience  safeguard),  as  per  Table  1.  For  information,  considering  also  the  deficit 
resilience safeguard, the structural primary balance should amount to at least 0.5% of 
GDP  at  the  end  of  the  adjustment  period  (2030).  However,  the  deficit  resilience 
safeguard is not a requirement for Czechia, which is eligible for technical information. 

Table 1: Technical information provided by the Commission to Czechia 

Final year of the adjustment period 

Minimum value of the structural primary balance (% of GDP), scenario without the 
deficit resilience safeguard 

For information only: Minimum value of the structural primary balance (% of GDP), 
scenario with the deficit resilience safeguard 

Source: Commission’s calculations. 

2030 

0.5 

0.5 

(11) 

In  line  with  Article  12  of  Regulation  (EU)  2024/1263,  Czechia  and  the  Commission 
engaged  in  a  technical  dialogue  in  the  course  of  May  and  June  2026.  The  technical 
dialogue  centred  on  the  maximum  growth  rates  of  net  expenditure  envisaged  by 
Czechia  and  their  underlying  assumptions  (in  particular  potential  GDP  growth 
projections,  real  GDP  growth  and  nominal  (implicit)  interest  rate),  as  well  as  on  the 
envisaged  delivery  of  reforms  and  investments  responding  to  the  main  challenges 
identified  in  the  context  of  the  European  Semester  and  the  common  priorities  of  the 
Union  of  a  fair  green  and  digital  transition,  social  and  economic  resilience,  energy 
security and the build-up of defence capabilities. 

(12)  According to the information provided by Czechia in its plan, on 6 May 2026, in line 
with Article 11(3) of Regulation  (EU) 2024/1263, Czechia engaged in a consultation 
process  with  civil  society,  social  partners,  regional  authorities  and  other  relevant 
stakeholders.  According  to  the  information  provided  by  Czechia  in  its  plan,  the 
revision of the plan was prepared in cooperation with the relevant ministries and other 
public  administration  bodies,  including  the  Czech  Fiscal  Council.  In  addition,  on  6 
May 2026, a roundtable discussion on the draft plan was held with representatives of 
employers, trade unions, experts and other stakeholders. 

SUMMARY OF THE PLAN AND THE COMMISSION’S ASSESSMENT THEREOF 

(13) 

In  line  with  Article  16  of  Regulation  (EU)  2024/1263,  the  Commission  assessed  the 
plan of June 2026 as follows: 

Context: macroeconomic and fiscal situation and outlook  

(14)  Real  GDP  in  Czechia  grew  by  2.6%  in  2025,  driven  by  both  domestic  and  external 
demand. According to the European Commission Spring 2026 Forecast, the economy 
is expected to grow by 1.8% in 2026, reflecting the impact of the energy price shock 
and  a  negative  contribution  from  net  exports.  In  2027,  real  GDP  is  projected  to 
increase  by  2.4%,  supported  by  solid  household  and  government  consumption, 

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investment, and a higher contribution from net exports. Over the forecast horizon (i.e., 
2026-2027),  potential  GDP  growth  in  Czechia  is  expected  to  decrease  slightly,  from 
1.6% in 2025 to 1.5% in 2027, driven by a slowdown in the growth rate of the working 
population.  The  unemployment  rate  stood  at  2.8%  in  2025  and  is  projected  by  the 
Commission  to  rise  to  3.1%  in  2026  and  3.2%  in  2027.  Inflation  (GDP  deflator)  is 
projected to decrease from 3.5% in 2025 to 2.7% in 2026, and to reach 3.1% in 2027.  

(15)  Regarding  fiscal  developments,  Czechia’s  general  government  deficit  amounted  to 
2.1% of GDP in 2025. According to the European Commission Spring 2026 Forecast, 
the deficit is set to reach 2.8% of GDP in 2026 and, assuming unchanged policies, to 
increase  further  to  2.9%  of  GDP  in  2027.  The  cut-off  date  of  the  Commission  2026 
Spring Forecast was 4 May 2026[, i.e., before the draft budget for 2027 was presented 
to the national parliament in September 2026: this text in square brackets needs to be 
confirmed or adjusted in September at the time of the discussion in the committees and 
further handling by the Council secretariat]. The general government debt was 44.3% 
of GDP at  end-2025.  According to  the European Commission Spring 2026 Forecast, 
the debt ratio is expected to increase to 45.8% of GDP at end-2026 and is projected to 
increase further to 47.2% of GDP at end-2027. According to established practice, the 
fiscal  forecast  by  the  Commission  does  not  consider  the  policy  commitments  in  the 
medium-term fiscal-structural plans as such, unless and until they are underpinned by 
credibly announced and sufficiently specified concrete policy measures. 

Maximum growth rates of net expenditure and main macroeconomic assumptions in the 
plan of June 2026 

(16)  The plan covers the period 2027-2030 and presents a fiscal adjustment over four years. 

(17)  The  plan  contains  all  information  required  by  Article  13  of  Regulation  (EU) 

2024/1263.  

(18)  The plan commits to the maximum growth rates of net expenditure indicated in Table 
2  below,  corresponding  to  average  annual  net  expenditure  growth  of  3.2%  over  the 
years  2027-2030.  The  technical  information  (assuming  a  linear  adjustment  path)  is 
consistent with an average net expenditure growth of 3.2% over the adjustment period 
(2027-2030). The net expenditure path committed to in the plan is expected to lead to 
a  structural  primary  balance  of  0.3%  of  GDP  at  the  end  of  the  adjustment  period 
(2030).  This  is  lower  than  the  minimum  level  of  the  structural  primary  balance  of 
0.5% of GDP in 2030 provided by the Commission in the technical information. The 
plan  assumes  that  potential  GDP  growth  decreases  to  1.2%  in  2030  (from  1.6%  in 
2025). In addition, the plan expects the growth rate of the GDP deflator to decrease to 
3.3% in 2027 (from 3.5% in 2025), before decreasing to 2.4% in 2030. 

Table 2: Maximum net expenditure growth and main assumptions in Czechia’s plan(*)  

2026 

2027 

2028 

2029 

2030 

Average over the 
period of validity of 
the plan 

2027-2030 

Net expenditure growth 
(annual, %) 

6.4 

5.4 

2.7 

2.4 

2.2 

3.2 

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Net expenditure growth 
(cumulative, from base 
year 2025(**), %) 

Potential GDP growth 
(%) 

Inflation (GDP deflator 
growth) (%) 

6.4 

12.1 

15.2 

17.9 

20.5 

1.6 

1.5 

1.5 

1.2 

1.2 

2.9 

3.3 

2.8 

2.6 

2.4 

n.a. 

1.3 

2.8 

Source: Medium-term fiscal-structural plan of Czechia (June 2026) and Commission calculations.  

(*) In the plan, two sets of macroeconomic assumptions are presented, based on the Macroeconomic 
Forecast  of  the  Czech  Republic  (April  2026)  and  based  on  the  Commission  Spring  2026  Forecast 
(May 2026). Tables 3.4 and 3.5 in the plan are used for the assessment. (**) The cumulative growth 
rates are calculated by reference to the base year of 2025, the latest year for which outturn fiscal data 
have been published by the national statistical institute and Eurostat.  

institute  and  Eurostat.  Compared 

(19)  The plan estimates the net expenditure growth rate in 2026 at 6.4%. This growth rate 
is relevant for defining the cumulative growth rates for 2027-2030 shown in Table 2, 
as the base year is 2025, the last year for which outturn data have been published by 
the  national  statistical 
the  Council 
Recommendation of 21 January 2025, the net expenditure growth for 2026 projected 
in the plan would, based on Commission calculations, imply a cumulative deviation of 
0.1%  of  GDP  by  end  2026,  before  considering  the  flexibility  provided  for  by  the 
national escape clause (see Table 3). After considering the flexibility from the national 
escape  clause,  the  projected  cumulated  deviation  would  be  -0.2%  of  GDP  (i.e., 
therefore below the recommended expenditure path in 2026 after taking into account 
the flexibility). This is the same as in the Commission assessment in the spring 2026 
European semester package (See recital 6). 

to 

Table  3:  Net  expenditure  growth,  annual  and  cumulated  deviations  in  2025  and  2026 
(projected) compared to the Council Recommendation of 21 January 2025 

2025 

2026 

Recommended maximum net expenditure, 
annual 
Council recommendation of 21 January 

% change 

4.5 

2.5 

Net expenditure, annual 
Annual deviation* 
Cumulated deviation* 
Cumulated deviation* after NEC flexibility 

% change 
% GDP 
% GDP 
% GDP 

4.9 
0.2 
-1.4 
-1.7 

COM  MTP 
6.4 
1.5 
0.1 
-0.2 

6.4 
1.5 
0.1 
-0.2 

Deviations for 2026 are calculated by Commission services, assuming net expenditure growth as projected in 
the  Commission  Spring  2026  Forecast  (COM)  and  in  the  Medium  Term  Fiscal  Structural  Plan  of  Czechia 
(June  2026)  (MTP).  *  A  positive  (negative)  value  indicates  that  net  expenditure  is  above  (below)  the 
recommended maximum growth rate. 

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Implications  of  the  plan’s  net  expenditure  commitments  for  the  general  government 
balance 

(20)  Based  on  the  plan’s  maximum  growth  rates  of  net  expenditure  and  assumptions,  the 
general  government  deficit  would  gradually  improve  from  2.8%  of  GDP  in  2026  to 
1.2%  of  GDP  at  the  end  of  the  adjustment  period  (2030),  as  per  Table  4.  Thus, 
according  to  the  plan,  the  general  government  balance  would  not  exceed  the  3%  of 
GDP reference value at the end of the adjustment period (2030). In addition, in the ten 
years following the adjustment period (i.e. until 2040), the government deficit would 
not  exceed  3%  of  GDP.  Therefore,  based  on  the  plan’s  policy  commitments  and 
macroeconomic  assumptions,  the  net  expenditure  path  put  forward  in  the  plan  is 
consistent with the requirement for the deficit as set out in Article 16(2) of Regulation 
(EU) 2024/1263. 

Implications of the plan’s net expenditure commitments for general government debt  

(21) 

If  the  maximum  growth  rates  of  net  expenditure  committed  to  in  the  plan  and  the 
underlying assumptions materialise, general government debt would, according to the 
plan,  increase  from  45.8%  in  2026  to  46.6%  of  GDP  at  the  end  of  the  adjustment 
period (2030), as per Table 4. Over the medium term, i.e. until 2040, the debt ratio is 
expected to broadly stabilise until 2032 according to the plan and increase thereafter to 
52.9% of GDP in 2040. Thus, according to the plan, general government debt would 
stay  below  the  Treaty  reference  value  of  60%  of  GDP  over  the  medium  term. 
Therefore, based on the plan’s policy commitments and macroeconomic assumptions, 
the  maximum  growth  rates  of  net  expenditure  put  forward  in  the  plan  are  consistent 
with  the  requirement  for  debt  as  set  out  in  Article  16(2)  of  Regulation  (EU) 
2024/1263. 

Table 4: General government debt and balance developments in Czechia’s plan  

2025 

2026 

2027 

2028 

2029 

2030 

2040 

Government debt 

44.3 

45.8 

46.9 

46.6 

46.8 

46.6 

52.9 

(% of GDP) 

Government balance 

-2.1 

-2.8 

-2.8 

-2.0 

-1.6 

-1.2 

-3.0 

(% of GDP) 

Source: Medium-term fiscal-structural plan of Czechia (June 2026) 

Macroeconomic assumptions of the plan 

(22)  The  plan  is  based  on  a  set  of  assumptions  that  differs  from  the  Commission’s 
assumptions,  which  were  transmitted  to  Czechia  on  28  May  2026.  In  particular,  the 
plan  uses  different  assumptions  for  six  variables,  namely  GDP  deflator  growth,  real 
GDP growth, the nominal (implicit) interest rate, the fiscal multiplier, the stock-flow 
adjustment,  and  one-offs.  The  differences  in  assumptions  with  the  most  significant 
impact on average maximum net expenditure growth are listed and assessed below.  

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• 

• 

The  plan  differs  from  the  Commission’s  prior  guidance  in  two  respects 
concerning the GDP deflator growth. First, based on a higher assumed growth 
of the domestic demand deflator, the plan includes a GDP deflator growth for 
2027  that  is  higher  by  0.2  percentage  point  than  in  the  technical  information 
provided  by  the  Commission  and  based  on  the  2026  Spring  Forecast.  This 
assumption is deemed not to be duly justified; the Commission is not aware of 
data releases or updates which would justify a sizeable upward revision in the 
GDP  deflator  estimate  for  2027,  compared  to  the  one  in  the  technical 
information. Furthermore, the most recent macroeconomic developments (i.e., 
faster-than-expected  decline  of  energy  commodity  prices  in  2026)  point  to  a 
less marked decline in import prices of goods in 2027, which would lower the 
GDP  deflator  estimates  for  2027.    Second,  as  from  2028,  the  GDP  deflator 
growth  converges  faster  and  to  a  lower  level  (2.0%)  than  what  is  assumed 
under  the  common  DSA  framework  (2.3%).  This  more  cautious  assumption 
than in the technical information is explained in the plan by assuming a gradual 
convergence of consumer price inflation to the Czech central bank’s 2% target 
by 2032, and by also assuming the convergence of GDP deflator growth to this 
value in 2032 and then remaining stable at the 2032 values over the rest of the 
projection  horizon.  Overall,  average  GDP  deflator  growth  over  the  entire 
projection  period  (2027-2040)  is  lower  in  the  plan  than  according  to  the 
Commission’s  assumptions,  at  2.2%  compared  to  2.6%  respectively.  For  the 
purpose  of  preparing  the  medium-term  plan,  the  assumption  for  the  average 
GDP deflator growth over the entire projection period (2027-2040) is therefore 
deemed prudent and duly justified. 

The  plan  assumes  the  nominal  (implicit)  interest  rate  to  be  lower  by  0.2 
percentage point on average over the projection horizon than the Commission’s 
assumption.  In  the  context  of  the  medium-term  plan,  lower  interest  allows 
higher  average  net  primary  expenditure  growth  over  the  adjustment  period. 
This deviation in the nominal (implicit) interest rate results from lower market 
interest  rates  assumptions  over  the  adjustment  period  for  the  short  term  and 
long term by 0.6 and 0.8 percentage point respectively, which represents more 
benign  assumptions  compared  to  the  Commission’s.  This  is  explained  by  the 
incorporation  of  more  granular  data  as  well  as  the  use  of  a  different  forecast 
method, which is based on an expectation of a stabilisation of the interest rates 
in line with the path of the central bank’s base policy rate. This approach is not 
in line with the common DSA framework.  

Remaining differences in assumptions do not have a significant impact on average net 
expenditure  growth  compared  to  the  European  Commission’s  assumptions.  On 
balance,  the  impact  of  more  cautious  assumptions  broadly  cancels  out  the  impact  of 
the differences in assumptions that are not in line with the DSA framework. Overall, 
all  the  differences  in  assumptions  taken  together  are  consistent  with  an  average 
maximum  net  expenditure  growth  that  is  equal  to  the  average  maximum  net 
expenditure growth implied by the technical information. The European Commission 
will  take  into  account  the  above  assessment  of  the  plan’s  assumptions  in  future 
assessments of compliance with the maximum growth rates of net expenditure.  

Fiscal strategy of the plan  

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(23)  According  to  the  indicative  fiscal  strategy  in  the  plan,  the  commitments  on  net 
expenditure  will  be  delivered  mainly  through  both  expenditure  restraint  and 
discretionary revenue increases.  According to the plan, the positive impact on public 
revenue should result from increasing the efficiency of tax collection and curbing the 
shadow  economy.  Digitising  and  streamlining  public  administration  should  decrease 
the growth of public expenditure. Finally, increasing economic growth through higher 
investment,  innovation  and  infrastructure  modernisation  should  support  fiscal 
consolidation in nominal terms. One of the most significant measures expected is the 
forthcoming  EET  2.0  system,  i.e.  the  modernised  electronic  registration  of  sales, 
which is expected to reduce tax evasion.  

(24)  The specification of the policy measures to be adopted is to be confirmed or adjusted 
and  quantified  in  the  annual  budgets.  At  the  same  time,  there  are  risks  to  the 
implementation  of  the  indicative  fiscal  strategy  in  the  plan,  which  stem  from  the 
backloaded  time  profile  of  the  adjustment,  the  electoral  cycle,  and  the  lack  of 
information on the intended fiscal strategy in the outer years of the plan (as assessed 
above).  

Reform  and  investment  intentions  in  the  plan  responding  to  the  main  challenges 
identified in the context of the European Semester and addressing the common priorities 
of the Union  

(25)  The plan describes policy intentions concerning reforms and investments to respond to 
the main challenges identified in  the context of the European Semester, as  set  out in 
particular in the 2025 country-specific recommendations, and in line with the priorities 
of the Communication “A Competitiveness Compass for the EU”12. The plan includes 
reforms  and  investments,  most  of  which  are  financially  supported  either  by  the 
Recovery  and Resilience Facility  (RRF) or by the cohesion  policy  funds. The plan’s 
reforms  and  investments  are  based  on  an  existing  government  strategy  document 
(‘Economic  Strategy  “Czech  Republic:  A  Country  for  the  Future  2.0’).  As  indicated 
above, after the submission of the plan of June 2026, the Council has adopted the 2026 
country-specific recommendations, 13 which therefore could not yet be reflected in the 
plan.  

(26)  Concerning  the  common  priority  of  a  fair  green  and  digital  transition,  including  the 
climate objectives set out in Regulation (EU) 2021/1119, the plan includes measures, 
some of which are supported by the RRF. The  measures  related to  challenges of the 
green  transition  are  included  in  the  National  Energy  and  Climate  Plan  of  the  Czech 
Republic.  The  most  important  measures  include  the  modernisation  of  distribution 
networks  focused  on  increasing  capacity  for  connecting  new  sources  and  installing 
large-capacity  batteries,  rolling  out  of  supporting  infrastructure  including  the  Energy 
Data Centre, introducing special zones for energy storage and for grid infrastructure, 
modernisation of industry and the heating sector through the “HEAT” programme, and 
creation of a comprehensive legal  framework for the establishment and development 
of the hydrogen market and hydrogen infrastructure in Czechia (LEX HYDROGEN). 
In  the  area  of  building  decarbonisation,  a  new  energy  standard  for  planned 

12 
COM(2025)30 final. 
13 

See  Commission  Communication  “A  Competitiveness  Compass  for  the  EU”  of  29  January  2025, 

Council  Recommendation  on  the  economic,  social,  employment,  structural  and  budgetary  policies  of 
Czechia, OJ C, C/2026/XXXX, XX.X.2026, ELI: http://data.europa.eu/eli/C/20XX/XXXX/oj.  

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construction and a new energy performance database with online viewing capabilities 
will be introduced. Regarding energy efficiency, the New Green Savings and the New 
Green Savings Light programme, which support in-depth renovation of buildings, are 
being amended to increase their financial sustainability and leverage and focus on low-
income  individuals.  Other  relevant  measures  include  electrification  of  train  tracks, 
replacement  of  vehicles  with  more  emission-efficient  ones  and  support  of  the 
acquisition  and  operation  of  zero-emission  vehicles.  These  measures  relate  to  the 
CSRs  in  the  policy  area  of  renewable  energy,  energy  infrastructure  and  networks, 
energy  efficiency,  and  sustainable  transport.  Concerning  challenges  of  digital 
transition,  the most important  measures include development  of high-capacity digital 
networks,  continued  roll-out  of  digital  public  services,  and  support  of  digitization  of 
businesses.  These  measures  relate  to  the  2025  CSRs  in  the  policy  area  of  public 
administration, access to finance and growth financing.  

(27)  Concerning  the  common  priority  of  social  and  economic  resilience,  including  the 
European  Pillar  of  Social  Rights,  the  plan  includes  measures,  some  of  which  are 
supported  by  the  RRF  and  ESF+.  Concerning  challenges  to  smart,  sustainable  and 
inclusive  growth,  the  most  important  measures  include  programmes  supporting 
research,  development  and  innovation  in  businesses,  with  a  focus  on  critical  and 
emerging  strategic  technologies,  particularly  AI,  and  introducing  innovations  into 
business  practice  in  small  and  medium-sized  enterprises.  Other  programmes  aim  at 
helping  to  develop  the  potential  of  existing  start-ups  with  the  aim  of  strengthening 
innovative  cooperation  between  Czech  start-ups  and  world-leading  start-up 
ecosystems.  The  government  also  implements  changes  to  the  evaluation,  and 
facilitates collaboration,  of research organisations. These measures relate to the 2025 
CSRs in the policy area of research and innovation. 

Concerning challenges to social and territorial cohesion, the most important measures 
include increasing pension adequacy, simplifying and changing the parameters of the 
social  benefits  system,  and  increasing  the  labour  market  participation  of  parents, 
especially  women,  and  of  disadvantaged  groups  through  support  for  the  social 
the 
economy.  Other  relevant  measures 
Construction  Act  aimed  at  speeding  up  housing  construction,  reform  of  the  rental 
market, and revival of social housing construction. These measures concern the 2025 
CSRs  in  the  policy  areas  of  active  labour  market  policies,  incentives  to  work  and 
labour market participation, non-discrimination and equal opportunities, and housing. 

the  planned  amendment  of 

include 

Concerning challenges to health, and economic, social and institutional resilience, the 
most important measures include plans to strengthen capacity and efficiency of public 
administration  and  improve  quality  of  public  service,  increase  resilience,  efficiency, 
digitalisation and sufficient staffing of the healthcare sector, and further development 
of  long-term  care.  The  government  also  prioritises  curbing  illegal  and  undeclared 
work.  These  measures  relate  to  the  2025  CSRs  in  the  policy  area  of  public 
administration,  digitalisation  of  public  administration  and  public  services,  and 
budgetary framework and fiscal governance. 

Concerning policies for the next generation, the most important measures include the 
increase  of  the  accessibility  and  quality  of  pre-school  education,  strengthening  the 
quality  of  the  teaching  profession  and  management  of  schools,  and  increasing  the 
relevance  of  secondary  education  to  the  needs  of  the  labour  market.  In  tertiary 
education,  the  most  important  measures  include  increasing  student  success  rates, 
developing  strategically  important  study  programmes,  and  better  linking  universities 

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with the research and innovation sectors. These measures concern the 2025 CSR in the 
policy areas of education, non-discrimination and equal opportunities. 

(28)  Concerning the common priority of energy security, the plan includes measures, some 
of which are supported by the RRF. The most important measures include amendment 
to  the  Energy  Act  aimed  at  accelerating  the  construction  of  replacement  sources  for 
coal-fired  power  plants  that  are  being  phased  out.  The  grant  programme  “Strategic 
Investments  for  a  Climate-Neutral  Economy”  will  support  inter  alia  two  large-scale 
projects  on  battery  production  and  on  the  extraction  of  raw  materials  critical  for  the 
decarbonization  of  the  economy  and  strengthening  the  energy  security.  These 
measures  concern  the  2025  CSR  in  the  policy  area  of  renewable  energy,  energy 
infrastructure  and  networks.  The  government  also  continues  with  the  planned 
expansion of the Dukovany Nuclear Power Plant.  

(29)  Concerning the common priority of defence capabilities, the plan includes the enacted 
Defence  Funding  Act  and  amended  Act  on  Budgetary  Rules,  which  require  the 
government  to  allocate  at  least  2%  of  GDP  to  defence  spending  and  allow  the 
government to increase defence spending for the years 2026 through 2033 above 2% 
of  GDP,  even  beyond  the  approved  budgetary  expenditure  framework.  Czechia  also 
requested to activate the national escape clause, which allows for flexibility to increase 
defence spending by 1.5% of GDP in 2025–2028. These measures relate to the 2025 
CSRs in the policy area of budgetary framework and fiscal governance. 

(30)  The  plan  provides 

information  on 

the  consistency  and,  where  appropriate, 
complementarity,  with  the  cohesion  policy  funds  and  Czechia’s  Recovery  and 
Resilience  Plan  (RRP).  The  dominant  part  of  the  measures  included  in  the  plan  is 
financed by the cohesion policy funds. The plan (and the respective annex) also maps 
the reforms and investments on the cohesion policy funds and the RRP. 

(31)  The  plan  provides  an  overview  of  the  public  investment  needs  of  Czechia  related  to 
the  common  priorities  of  the  Union.  Regarding  the  common  priority  of  a  fair  green 
and  digital  transition,  including  consistency  with  the  European  Climate  Law, 
investment  needs  include  transformation  of  the  energy  sector,  development  of 
renewable  energy sources, reducing energy  consumption  and emissions  of buildings, 
and  developing  5G  mobile  network  infrastructure.  To  ensure  social  and  economic 
resilience,  Czechia  plans  to  broaden  supply  of  digital  public  services,  invest  in 
innovative start-ups and growing companies, and increase efficiency of healthcare. To 
increase energy security, Czechia intends to invest in clean energy sources. 

Conclusion of the Commission’s assessment 

(32)  Overall,  the  Commission  is  of  the  view  that  Czechia’s  plan  of  June  2026  fulfils  the 

requirements of Regulation (EU) 2024/1263. 

OVERALL CONCLUSION ON THE REVISED PLAN OF CZECHIA AND ON THE 
FLEXIBILITY PROVIDED FOR BY THE NATIONAL ESCAPE CLAUSE 

(33)  This  recommendation  supersedes  the  Recommendation  of  21  January  2025  with 
regard to the years 2027 and 2028. The maximum growth rates of net expenditure for 
2026,  in  annual  and  cumulative  terms,  in  Annex  I  of  that  Recommendation  remain 
relevant  to  assess  compliance until  and including  2026. The Commission  will assess 

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compliance for 2026 in the context of its autumn 2026 surveillance package and, based 
on outturn data, in spring 2027.  

(34) 

In  accordance  with  Article  17  of  Regulation  (EU)  2024/1263,  the  maximum  growth 
rates  of  net  expenditure  committed  to  in  the  plan  of  June  2026  should  be 
recommended by the Council to Czechia. 

(35)  With  regard 

to 

the  Council  recommendation  of  8  July  2025, 

the  current 
recommendation clarifies the amount of flexibility allowed under the national escape 
clause for the increase in defence expenditure14 that applies in 2027 and 2028. For that 
purpose, the overall maximum flexibility available in 2027 and 2028 should be limited 
to the flexibility that has not been used in respect of the superseded Recommendation 
of 21 January 2025. 

(36) 

In general, when a Member State has already made use of the flexibility provided by 
the  national  escape  clause  for  defence  expenditure,  only  the  part  of  the  increase  in 
defence  expenditure  as  percent  of  GDP  since  the  reference  year  that  is  above  the 
already used flexibility qualifies for flexibility in the remaining years covered by the 
national escape clause. Moreover, in such cases also the available maximum flexibility 
of 1.5% of GDP should be reduced by the amount of previously used flexibility. In the 
case  of  Czechia,  the  relevant  year  for  measuring  the  used  flexibility  is  2026,  i.e.  the 
last year to which the Recommendation of 21 January 2025 applies. According to the 
Commission, before considering the flexibility provided by the national escape clause, 
in  2026  net  expenditure  deviated  by  0.1%  of  GDP  in  cumulative  terms  from  the 
maximum net expenditure path recommended by the Council on 21 January 2025 (see 
recital  6).  According  to  the  Commission  Spring  2026  Forecast,  nationally  financed 
defence spending in Czechia is projected to increase by 0.3 percentage points of GDP 
between 2021 and 2026. Based on these projections, the projected deviation for 2026 
is  therefore  expected  to  be  within  the  flexibility  of  the  national  escape  clause.  This 
corresponds to a projected use of the flexibility of 0.1% of GDP in 2026. However, the 
actual  used  flexibility  in  2026  relevant  for  this  recommendation  can  only  be 
determined when outturn data will be available, in spring 2027. The Commission will 
compute and communicate the available maximum flexibility based on outturn data in 
spring 2027. 

HEREBY RECOMMENDS that: 

(1) 

(2) 

Czechia ensure that net expenditure growth does not exceed the maxima established 
in Annex I to this Recommendation. 

Until  2028,  Czechia  be  allowed  to  exceed  the  maximum  growth  rates  of  net 
expenditure  as  set  by  point  1  of  this  Recommendation,  to  the  extent  that  the  net 
expenditure in excess of these maximum growth rates is not more than the minimum 
of:  

(a) 

the  difference between the increase in  defence expenditure in  percent  of GDP 
since  2021  and the flexibility used until 2026 under the Recommendations of 
21 January 2025 and 8 July 2025; and 

14 

General government defence expenditure according to the International  Classification of the Functions 
of Government (COFOG).  

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(3) 

(4) 

(5) 

(b) 

the difference between 1.5% of GDP and the flexibility used until 2026 under 
the Recommendations of 21 January 2025 and 8 July 2025. 

The  flexibility  used  until  2026  is  to  be  computed  and  communicated  by  the 
Commisison in spring 2027 based on outturn data for 2026. 

In  the  years  after  2028,  Czechia  still  be  allowed  to  deviate  from  and  exceed  the 
maximum  growth  rates  of  net  expenditure  as  set  by  a  Council  Recommendation  in 
accordance with  Articles 17, 19 or 20 of Regulation  (EU) 2024/1263, to  the extent 
that  the  net  expenditure  in  excess  of  these  maximum  growth  rates  is  related  to 
deliveries of military equipment contracted before end-2028 and remains within the 
overall limit mentioned in point 2.  

In accordance with Article 22(7) of Regulation (EU) 2024/1263, the deviations from 
the maximum growth rates of net expenditure as set by the Council that are allowed 
by  this  Recommendation  will  not  be  recorded  as  debits  in  the  control  account  of 
Czechia. 

In order to ensure a correct recording of the additional expenditure, Czechia include 
actual  and  planned  data  on  total  defence  expenditure  (COFOG  division  02), 
including defence investment (COFOG division 02 P.51) and any expenditure to be 
financed by SAFE loans that are not covered in COFOG-02: 

(a) 

(b) 

for  years  T-4,  T-3,  T-2  and  T-1  (with  year  T  being  the  current  year),  in  the 
reporting to the Commission (Eurostat) in accordance with Council Regulation 
(EC) No 479/2009 (15); 

for years 2021 through year T (current year), in national medium-term  fiscal-
structural  plans  and  in  annual  progress  reports  in  accordance  with  Article 
11(1), Article 15 and Article 21(1) of Regulation (EU) 2024/1263. 

This Recommendation is addressed to Czechia. 

ANNEX I 
Maximum growth rates of net expenditure 
(annual and cumulative growth rates, in nominal terms) 
Czechia 

Years 

2027 

2028 

2029 

2030 

Growth rates 
(%) 

Annual 

5.4 

2.7 

2.4 

2.2 

Cumulative 
(*) 

12.1 

15.2 

17.9 

20.5 

(*) The cumulative growth rates are calculated by reference to the base year of  2025. The cumulative 
growth rates are used in the annual monitoring of ex-post compliance in the control account. 
Note: For 2026, the maximum annual and cumulative net expenditure growth rates established by the 
Council  Recommendation  of  21  January 2025  remain  relevant  and  will  be  subject  to  assessments  of 
compliance by the Commission based on outturn data. 

15 

Council  Regulation  (EC)  No  479/2009  of  25  May  2009  on  the  application  of  the  Protocol  on  the 
excessive  deficit  procedure  annexed  to  the  Treaty  establishing  the  European  Community  (OJ  L  145, 
10.6.2009, p. 1-9, ELI: http://data.europa.eu/eli/reg/2009/479/2014-09-01). 

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Done at Brussels, 

For the Council 
The President 

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