Europaudvalget 2025
KOM (2025) 0219
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EUROPEAN
COMMISSION
Brussels, 4.6.2025
COM(2025) 219 final
Recommendation for a
COUNCIL RECOMMENDATION
on the economic, social, employment, structural and budgetary policies of the
Netherlands
{SWD(2025) 219 final}
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Recommendation for a
COUNCIL RECOMMENDATION
on the economic, social, employment, structural and budgetary policies of the
Netherlands
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union, and in particular
Article 121(2) and Article 148(4) thereof,
Having regard to Regulation (EU) 2024/1263 of the European Parliament and of the Council
of 29 April 2024 on the effective coordination of economic policies and on multilateral
budgetary surveillance and repealing Council Regulation (EC) No 1466/97
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, and in particular
Article 3(3) thereof,
Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the
Council of 16 November 2011 on the prevention and correction of macroeconomic
imbalances
2
, and in particular Article 6(1) thereof,
Having regard to the recommendation of the European Commission,
Having regard to the resolutions of the European Parliament,
Having regard to the conclusions of the European Council,
Having regard to the opinion of the Employment Committee,
Having regard to the opinion of the Economic and Financial Committee,
Having regard to the opinion of the Social Protection Committee,
Having regard to the opinion of the Economic Policy Committee,
Whereas:
General considerations
(1)
Regulation (EU) 2024/1263, which entered into force on 30 April 2024, specifies the
objectives of the economic governance framework, which aims at promoting sound
and sustainable public finances and sustainable and inclusive growth and resilience
through reforms and investments, and preventing excessive government deficits. The
Regulation stipulates that the Council and the Commission conduct multilateral
surveillance in the context of the European Semester in accordance with the objectives
and requirements set out in the TFEU. The European Semester includes, in particular,
the formulation, and the surveillance of the implementation of country-specific
recommendations. The Regulation also promotes national ownership of fiscal policy
and emphasises its medium-term focus, combined with more effective and coherent
enforcement. Each Member State must submit to the Council and the Commission a
national medium-term fiscal-structural plan, containing its fiscal, reform and
investment commitments, over 4 or 5 years, depending on the length of the national
OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj.
OJ L 306, 23.11.2011, p. 25, ELI: http://data.europa.eu/eli/reg/2011/1176/oj.
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legislative term. The net expenditure
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path in these plans has to comply with the
Regulation’s requirements, including the requirements to put or keep general
government debt on a plausibly downward path by the end of the adjustment period, or
for it to remain at prudent levels below 60% of gross domestic product (GDP), and to
bring and/or maintain the general government deficit below the 3%-of-GDP Treaty
reference value over the medium term. Where a Member State commits to a relevant
set of reforms and investments in accordance with the criteria set out in the
Regulation, the adjustment period may be extended by up to three years.
(2)
Regulation (EU) 2021/241 of the European Parliament and of the Council
4
, which
established the Recovery and Resilience Facility (the ‘RRF’), entered into force on
19 February 2021. The RRF provides financial support to Member States for
implementing reforms and investments, delivering a fiscal impulse financed by the
Union. In line with the priorities of the European Semester for economic policy
coordination, the RRF fosters economic and social recovery while driving sustainable
reforms and investments, in particular promoting the green and digital transitions and
making Member States’ economies more resilient. It also helps strengthen public
finances and boost growth and job creation in the medium and long term, improve
territorial cohesion within the Union and support the continued implementation of the
European Pillar of Social Rights.
Regulation (EU) 2023/435 of the European Parliament and of the Council
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(the
‘REPowerEU Regulation’), which was adopted on 27 February 2023, aims to phase
out the Union’s dependence on Russian fossil-fuel imports. This helps achieve energy
security and diversify the Union’s energy supply, while increasing the uptake of
renewables, energy storage capacities and energy efficiency. The Netherlands added a
REPowerEU chapter to its national recovery and resilience plan in order to finance key
reforms and investments that will help achieve the REPowerEU objectives.
On 8 July 2022, the Netherlands submitted its national recovery and resilience plan to
the Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241.
Pursuant to Article 19 of that Regulation, the Commission assessed the relevance,
effectiveness, efficiency and coherence of the recovery and resilience plan, in
accordance with the assessment guidelines set out in Annex V. On 4 October 2022, the
Council adopted its Implementing Decision approving the assessment of the recovery
and resilience plan for the Netherlands
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, which was amended under Article 18(2) on
17 October 2023 to update the maximum financial contribution for non-repayable
(3)
(4)
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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.
Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17, ELI:
http://data.europa.eu/eli/reg/2021/241/oj).
Regulation (EU) 2023/435 of the European Parliament and of the Council of 27 February 2023
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans
and amending Regulations (EU) No 1303/2013, (EU) 2021/1060 and (EU) 2021/1755, and Directive
2003/87/EC (OJ L 63, 28.2.2023, p. 1, ELI: http://data.europa. eu/eli/reg/2023/435/oj).
Council Implementing Decision of 4 October 2022 on the approval of the assessment of the recovery
and resilience plan for the Netherlands (ST 12275/22 INIT; ST 12275/22 INIT ADD 1).
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financial support, as well as to include the REPowerEU chapter
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. This Council
Implementing Decision was amended on 17 October 2023 and again on 5 November
2024
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. The last revision of the Council Implementing Decision was adopted on 13
May 2025. The release of instalments is conditional on the adoption of a decision by
the Commission, in accordance with Article 24(5), stating that the Netherlands has
satisfactorily achieved the relevant milestones and targets set out in the Council
Implementing Decision. Satisfactory achievement requires that the achievement of
preceding milestones and targets for the same reform or investment has not been
reversed.
(5)
On 21 January 2025 the Council, upon the recommendation of the Commission,
adopted a recommendation setting the net expenditure path of the Netherlands
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. The
plan was submitted in accordance with Article 11 and Article 36(1), point (a), of
Regulation (EU) 2024/1263, covers the period from 2025 until 2028 and presents a
fiscal adjustment spread over four years.
On 26 November 2024, the Commission adopted an opinion on the 2025 draft
budgetary plan of the Netherlands. On the same date, on the basis of Regulation (EU)
No 1176/2011, the Commission adopted the 2025 Alert Mechanism Report, in which
it identified the Netherlands as one of the Member States for which an in-depth review
would be needed. The Commission also adopted a recommendation for a Council
recommendation on the economic policy of the euro area and a proposal for the 2025
Joint Employment Report, which analyses the implementation of the Employment
Guidelines and the principles of the European Pillar of Social Rights. The Council
adopted the Recommendation on the economic policy of the euro area
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on 13 May
2025 and the Joint Employment Report on 10 March 2025.
On 29 January 2025, the Commission published the Competitiveness Compass, a
strategic framework that aims to boost the EU’s global competitiveness over the next
five years. It identifies the three transformative imperatives of sustainable economic
growth: (i) innovation; (ii) decarbonisation and competitiveness; and (iii) security. To
close the innovation gap, the EU aims to foster industrial innovation, support the
growth of start-ups through initiatives like the EU Start-up and Scale-up Strategy, and
promote the adoption of advanced technologies like artificial intelligence and quantum
computing. In pursuit of a greener economy, the Commission has outlined a
comprehensive Affordable Energy Action Plan and a Clean Industrial Deal, ensuring
that the shift to clean energy remains cost-effective, competitiveness-friendly,
particularly for energy-intensive sectors, and is a driver for growth. To reduce
excessive dependencies and increase security, the Union is committed to strengthening
global trade partnerships, diversifying supply chains and securing access to critical
raw materials and clean energy sources. These priorities are underpinned by horizontal
enablers, namely regulatory simplification, deepening of the single market, financing
competitiveness and a Savings and Investments Union, promotion of skills and quality
jobs, and better coordination of EU policies. The Competitiveness Compass is aligned
Council Implementing Decision of 17 October 2023 amending the Implementing Decision of 4 October
2022 on the approval of the assessment of the recovery and resilience plan for the Netherlands (ST
13613/1/23, 13613/23 REV 1; ST 13613/1/23 ADD1 REV1).
ST 13789/24 INIT; ST 13789/24 ADD 1 REV 1.
Council Recommendation of 21 January 2025 setting the net expenditure path of the Netherlands, OJ
C/2025/648, 10.2.2025.
Council Recommendation of 13 May 2025 on the economic policy of the euro area (OJ C,
C/2025/2782, 22.5.2025, ELI: http:// data.europa.eu/eli/C/2025/2782/oj).
(6)
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with the European Semester, ensuring that Member States’ economic policies are
consistent with the Commission’s strategic objectives, creating a unified approach to
economic governance that fosters sustainable growth, innovation and resilience across
the Union.
(8)
In 2025, the European Semester for economic policy coordination continues to
develop alongside the implementation of the RRF. The full implementation of the
recovery and resilience plans remains essential for delivering on the policy priorities
under the European Semester, as the plans help effectively address all or a significant
subset of challenges identified in the relevant country-specific recommendations
issued in recent years. These country-specific recommendations remain equally
relevant for the assessment of amended recovery and resilience plans in accordance
with Article 21 of Regulation (EU) 2021/241.
The 2025 country-specific recommendations cover the key economic policy
challenges that are not sufficiently addressed by measures included in the recovery and
resilience plans, taking into account the relevant challenges identified in the 2019-
2024 country-specific recommendations.
On 4 June 2025, the Commission published the 2025 country report for the
Netherlands. It assessed the Netherlands’ progress in addressing the relevant country-
specific recommendations and took stock of the Netherlands’ implementation of the
recovery and resilience plan. Based on this analysis, the country report identified the
most pressing challenges the Netherlands is facing. It also assessed the Netherlands’
progress in implementing the European Pillar of Social Rights and in achieving the
Union headline targets on employment, skills and poverty reduction, as well as
progress in achieving the United Nations Sustainable Development Goals.
The Commission carried out an in-depth review under Article 5 of Regulation (EU)
No 1176/2011 for the Netherlands. The main findings of the Commission’s assessment
of macroeconomic vulnerabilities for the Netherlands for the purposes of that
Regulation were published on 13 May 2025
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. On 4 June 2025, the Commission
concluded that the Netherlands is experiencing macroeconomic imbalances. In
particular, vulnerabilities related to high private debt in a context of an overvalued
housing market, and the large current account surplus remain relevant, despite some
improvements including greater dynamism of domestic demand; these vulnerabilities
have cross-border relevance. The current account surplus is among the largest in the
euro area and is expected to remain high. From a savings-investment perspective, all
sectors of the economy are contributing to the surplus. The corporate sector’s surplus
is to a significant degree driven by the activities of the non-financial corporations
abroad and the contribution of multinationals’ retained earnings. Even though
consumption and investment growth were key drivers of the recovery from the
pandemic, the Netherlands is lagging the euro area in terms of the level of corporate
and public investment. Household debt remains among the highest in the EU but has
decreased significantly due to denominator effects while household borrowing
recovered strongly in 2024. House prices have edged up at increasing rates last year
and are expected to increase strongly also in 2025 as significant structural challenges
remain unaddressed. Policy progress has been limited. Some measures have been
taken that could decrease the current account surplus, but their overall impact is not
expected to be significant. Some measures have been taken to help boost housing
SWD(2025) 71 final.
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supply, but there has only been limited action to decrease incentives for household
borrowing. The recent introduction of rent limits poses risks to the development of the
private and social rental markets.
Assessment of the Annual Progress Report
(12)
On 21 January 2025 the Council recommended the following maximum growth rates
of net expenditure for the Netherlands: 3.5% in 2025, 3.3% in 2026, 3.0% in 2027, and
3.0% in 2028, which correspond to the maximum cumulative growth rates calculated
by reference to 2023 of 10.4% in 2025, 14.0% in 2026, 17.5% in 2027, and 21.0% in
2028. On 29 April 2025 the Netherlands submitted its Annual Progress Report
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, on
adherence to the recommended maximum growth rates of net expenditure and the
implementation of reforms and investments responding to the main challenges
identified in the European Semester country-specific recommendations. The Annual
Progress Report also reflects the Netherlands’ biannual reporting on the progress made
in achieving its recovery and resilience plan in accordance with Article 27 of
Regulation (EU) 2021/241.
Russia’s war of aggression against Ukraine and its repercussions constitute an
existential challenge for the European Union. The Commission recommended to
activate the national escape clause of the Stability and Growth Pact in a coordinated
manner to support the EU efforts to achieve a rapid and significant increase in defence
spending and this proposal was welcomed by the European Council of 6 March 2025.
Based on data validated by Eurostat
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, the Netherlands’ general government deficit
increased from 0.4% of GDP in 2023 to 0.9% in 2024, while the general government
debt fell from 45.2% of GDP at the end of 2023 to 43.3% at the end of 2024.
According to the Commission’s calculations, these developments correspond to a net
expenditure growth rate of 6.8% in 2024. In the 2025 Annual Progress Report, the
Netherlands estimates the net expenditure growth in 2024 at 5.7%. The Commission
estimates that the net expenditure growth was higher than in the Annual Progress
Report. The difference between the Commission’s calculations and the estimates of
national authorities is due to small discrepancies in the estimated impact of
discretionary revenue measures. Based on the Commission’s estimates, the fiscal
stance
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, which includes both nationally and EU financed expenditure, was broadly
neutral in 2024.
According to the Annual Progress Report, the macroeconomic scenario underpinning
the budgetary projections by the Netherlands expects real GDP growth at 1.9% in
2025 and 1.5% in 2026, while HICP inflation is projected at 3.0% in 2025 and 2.4% in
2026. The Commission Spring 2025 Forecast projects real GDP to grow by 1.3% in
2025 and 1.2% in 2026, and HICP inflation to stand at 3.0% in 2025 and 2.0% in
2026.
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The 2025 Annual Progress Reports are available on:
https://economy-finance.ec.europa.eu/economic-
and-fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en.
Eurostat-Euro Indicators, 22.4.2025.
The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of
the general government. It aims to assess the economic impulse stemming from fiscal policies, both
those that are nationally financed and those that are financed by the EU budget. The fiscal stance is
measured as the difference between (i) the medium-term potential growth and (ii) the change in primary
expenditure net of discretionary revenue measures and including expenditure financed by non-repayable
support (grants) from the Recovery and Resilience Facility and other Union funds.
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(16)
In the Annual Progress Report, the general government deficit is expected to increase
to 2.3% of GDP in 2025, while the general government debt-to-GDP ratio is set to
increase to 45.0% by the end of 2025. These developments correspond to net
expenditure growth of 7.9% in 2025. The Commission Spring 2025 Forecast projects a
general government deficit of 2.1% of GDP in 2025. The increase of the deficit in
2025 mainly reflects personal income tax cuts, increasing government spending on
compensation of employees and intermediate consumption due to a higher-than-
expected base in 2024 and a reduction of some revenue components due to
anticipation effects that boosted revenue in 2024. According to the Commission’s
calculations, these developments correspond to net expenditure growth of 7.0% in
2025. These lower projections of net expenditure growth than in the Annual Progress
Report are due to a higher level of underspending assumed in the Commission’s
estimates as well as small discrepancies in the impact of discretionary revenue
measures. Based on the Commission’s estimates, the fiscal stance, which includes both
nationally and EU financed expenditure, is projected to be expansionary, by 0.6% of
GDP, in 2025. The general government debt-to-GDP ratio is set to increase to 45.0%
by the end of 2025. The increase of the debt-to-GDP ratio in 2025 mainly reflects the
budget deficit as well as stock-flow adjustments.
General government expenditure amounting to 0.1% of GDP is expected to be
financed by non-repayable support (“grants”) from the Recovery and Resilience
Facility in 2025, compared to 0.1% of GDP in 2024, according to the Commission
Spring 2025 Forecast. Expenditure financed by Recovery and Resilience Facility non-
repayable support enables high-quality investment and productivity-enhancing reforms
without a direct impact on the general government balance and debt of the
Netherlands.
General government defence expenditure in the Netherlands remained stable at 1.3%
of GDP between 2021 and 2023
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. According to the Commission Spring 2025
Forecast, expenditure on defence is projected at 1.5% of GDP in both 2024 and 2025.
This corresponds to an increase of 0.2 percentage points of GDP compared to 2021.
According to the Commission Spring 2025 Forecast, net expenditure in the
Netherlands is projected to grow by 7.0% in 2025 and 14.3% cumulatively in 2024
and 2025. Based on the Commission Spring 2025 Forecast, the net expenditure growth
of the Netherlands in 2025 is projected to be above the recommended maximum
growth rate, corresponding to a deviation
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of 1.4% of GDP in annual terms. When
considering 2024 and 2025 together, the cumulative growth rate of net expenditure is
also projected to be above the recommended maximum growth rate, corresponding to
a deviation of 1.4% of GDP. The projected deviations exceed the 0.3% of GDP
threshold for the annual deviation and the 0.6% of GDP threshold for the cumulative
deviation. Overall, this means there is a risk of deviation from the recommended
maximum net expenditure growth, when outturn data for 2025 will be available next
spring.
In the Annual Progress Report, the general government deficit is projected to increase
to 2.8% of GDP in 2026, while the general government debt-to-GDP ratio is projected
to increase to 47.8% by the end of 2026. After 2026, in the Annual Progress Report,
Eurostat, government expenditure by classification of functions of government (COFOG).
From 2026 these figures will appear in the control account that is established in Article 22 of the
Regulation (EU) 2024/1263.
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the general government deficit is projected to decrease to 2.0% of GDP in 2027 and
2.2% 2028. In turn, after 2026, the general government debt-to-GDP ratio is projected
to increase to 48.5% in 2027 and 49.2% in 2028. Based on policy measures known at
the cut-off date of the forecast, the Commission Spring 2025 Forecast projects a
general government deficit of 2.7% of GDP in 2026. The increase of the deficit in
2026 mainly reflects a reform of the military pension system which requires a lump-
sum transfer of the government to a pension fund that is outside of government control
with a budgetary impact of 0.7% of GDP, which is recorded as a one-off measure.
Without this transaction, the government balance would improve moderately as VAT
rates on certain goods and services are increased, and personal income tax brackets are
not fully adjusted to inflation. These developments correspond to net expenditure
growth of 3.8% in 2026. Based on the Commission’s estimates, the fiscal stance,
which includes both nationally and EU financed expenditure, is projected to be
broadly neutral in 2026. The general government debt-to-GDP ratio is projected by the
Commission to increase to 47.8% by the end of 2026. The increase of the debt-to-GDP
ratio in 2026 mainly reflects the budget deficit as well as stock-flow adjustments.
Key policy challenges
(21)
The Dutch system of private income taxation treats certain assets differently from the
rest, affecting the allocation of capital and distorting economic decisions. Housing
wealth and pension contributions are given preferential treatment, boosting demand in
the owner-occupied housing market and lowering disposable incomes of households
due to high pension contributions. In addition, holding assets in closely held
companies (a company in which the majority of its shares are owned by only a few
individuals) allows taxpayers to delay tax payments on such returns, while still
benefiting from those returns through tax-free loans from the company. Furthermore,
households with financial market assets are taxed at assumed rates of return, which is
unfavourable when the actual return is lower. As a result, household wealth in the
Netherlands is highly concentrated in illiquid types of wealth, such as housing or
pensions. This exposes households to greater economic risk during economic shocks
and in many cases may not lead to an optimal consumption pattern over their lifetime
as disposable incomes are squeezed by high pension contributions and mortgage
payments during working age. The unequal tax treatment within and across asset types
gives rise to tax arbitrage, reduces the ability of the tax system to act as an automatic
stabiliser, exacerbates economic inequalities and can skew the efficient allocation of
capital. As a result, this unequal treatment is also relevant when it comes to addressing
macroeconomic imbalances.
In addition to the tax incentives mentioned above, overvaluation in the housing market
has been fuelled by a shortage of new dwellings. The government could advance its
plans to increase housing supply by means of comprehensively removing obstacles
that are currently holding back residential construction, and, in particular, simplifying
planning and permitting processes that on average take up to 6-7 years to complete,
out of a total construction period of 10 years. This would help mitigate
macroeconomic imbalances.
The underdeveloped private rental market, characterised by high costs and limited
options for tenants, poses significant challenges as regards affordability and increases
poverty risks for low- and middle-income households. Recent policy developments,
including the extension of rent price controls, bans on buy-to-let properties, and
changes to the tax treatment of rental properties, have exacerbated existing supply
shortages in the private rental sector. The scarcity of affordable rental housing hinders
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labour mobility and competitiveness. To address this issue, rebalancing incentives
between homeownership and renting, and making investments more attractive by
allowing market forces to operate to a greater degree in the sector, could help expand
the private rental market. This, in turn, would help mitigate macroeconomic
imbalances.
(24)
The Dutch long-term care system faces significant challenges from an ageing
population, costly institutional care and generous coverage of dependents. The
Netherlands fares well compared to most Member States in terms of adequacy,
availability, and quality of the long-term care system as well as the size of the
workforce in the field. However, the system is increasingly putting pressure on the
government budget. In 2022, total long-term care spending in the Netherlands stood at
3.8% of GDP, the highest value in the EU by a wide margin. Furthermore, the
Commission’s 2024 Ageing Report expects the increase in long-term care spending by
2070 in the Netherlands to be one of the largest in the EU. Measures to address this
could include aligning co-payments, i.e. own contributions by patients, to the cost of
the care they receive across different types of benefits. The system would work more
efficiently if patients determined their choice of care setting based on their individual
care needs, instead of choosing a setting that minimises their co-payments. Additional
investments in prevention to delay the onset of long-term care needs and further
improving the delivery of community-based care could also help reduce costs. These
improvements could ensure that the benefits of the system are allocated more
efficiently without compromising the high coverage and quality of the system.
In accordance with Article 19(3), point (b), of Regulation (EU) 2021/241 and criterion
2.2 of Annex V to that Regulation, the recovery and resilience plan includes an
extensive set of mutually reinforcing reforms and investments to be implemented by
2026. These are expected to help effectively address all or a significant subset of
challenges identified in the relevant country-specific recommendations. Within this
tight timeframe, finalising the effective implementation of the recovery and resilience
plan, including the REPowerEU chapter, is essential to boost the Netherlands’ long-
term competitiveness through the green and digital transitions, while ensuring social
fairness. The systematic involvement of local and regional authorities, social partners,
civil society and other relevant stakeholders remains essential in order to ensure broad
ownership for the successful implementation of the recovery and resilience plan.
The implementation of cohesion policy programmes, which encompass support from
the European Regional Development Fund (ERDF), the Just Transition Fund (JTF)
and the European Social Fund Plus (ESF+), has accelerated in the Netherlands. It is
important to continue efforts to ensure the swift implementation of these programmes,
while maximising their impact on the ground. The Netherlands is already taking action
under its cohesion policy programmes to boost competitiveness and growth. At the
same time, the Netherlands continues to face challenges, and there could be scope to
further boost competitiveness, including by up- and reskilling of vulnerable groups
and developing and manufacturing critical technologies. In accordance with Article 18
of Regulation (EU) 2021/1060, the Netherlands is required – as part of the mid-term
review of the cohesion policy funds – to review each programme taking into account,
among other things, the challenges identified in the 2024 country-specific
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recommendations. The Commission proposals adopted on 1 April 2025
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extend the
deadline for submitting an assessment – for each programme – of the outcome of the
mid-term review beyond 31 March 2025. It also provides flexibilities to help speed up
programme implementation and incentives for Member States to allocate cohesion
policy resources to five strategic priority areas of the Union, namely competitiveness
in strategic technologies, defence, housing, water resilience and energy transition.
(27)
The Strategic Technologies for Europe Platform (STEP) provides the opportunity to
invest in a key EU strategic priority by strengthening the EU’s competitiveness. STEP
is channelled through 11 existing EU funds. Member States can also contribute to the
InvestEU programme supporting investments in priority areas. The Netherlands could
use these initiatives to support the development or manufacturing of critical
technologies, including clean and resource-efficient technologies.
Beyond the economic and social challenges addressed by the recovery and resilience
plan and other EU funds, the Netherlands faces several additional challenges related
to: i) R&D investments, ii) access to finance, iii) reliance on fossil fuels, iv) electricity
congestion, v) excessive nitrogen deposits, vi) labour and skills shortages, vii) basic
skills, and viii) participation in science, technology, engineering, and mathematics
(STEM) programmes.
The Netherlands has a well-performing research and innovation system, ranking fourth
in the Summary Innovation index. However, recent trends indicate public and private
R&D intensity has fallen below the EU average and globally, which can hinder long-
term competitiveness. In particular, sectors such as manufacturing and information and
communications technologies (ICT) face significant investment gaps, with investment
as a share of value added being lower than in the euro area. R&D investment as a
share of gross value added in the private sector lags behind other European innovation
leaders. At the same time, public R&D investment is falling below the EU average and
the recent budget cuts to the National Growth Fund have further reduced public
support to innovation. To address these challenges, a targeted approach is needed,
focusing on key competitive areas, investing in research and testing facilities, and
promoting priority technologies outlined in the National Technology Strategy,
including quantum technology, semiconductors, AI, and data science. By
strengthening public support for innovation, the Netherlands can boost the innovation
landscape and maintain its position as a European innovation leader.
Despite having well-capitalised financial markets that provide a stable source of
funding to the economy, as well as one of the deepest venture capital markets in the
EU, some start-ups and scale-ups face difficulties in accessing funding. In particular,
there is a funding gap for start-ups with capital needs above EUR 10 million and scale-
ups seeking funding above EUR 50 million before large-scale commercialisation.
They rely heavily on foreign investors. The Dutch government has announced several
initiatives to facilitate scale-up investments through Invest-NL and Dutch Venture
Initiative, but these initiatives need to be implemented and monitored effectively. The
current funding gap could hinder innovative investment and long-term
competitiveness, as start-ups and scale-ups show higher productivity growth than other
new businesses. To address this issue, the Netherlands can benefit from using
Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
amending Regulations (EU) 2021/1058 and (EU) 2021/1056 as regards specific measures to address
strategic challenges in the context of the mid-term review - COM(2025) 123 final.
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financing tools and schemes such as guarantees, or fund-to-fund instruments to
channel funding resources and attract institutional investors such as domestic pension
funds, which are the largest in the euro area.
(31)
The Netherlands still relies heavily on fossil fuels. In 2023, oil and natural gas
accounted for 43.9% and 33.8%, respectively, of the country’s overall energy mix,
while the share of renewables amounted to only 13.8%. This makes the Dutch
economy vulnerable to global price developments and hinders the transition to a green
economy. Despite the Netherlands advancing the roll-out of renewable energy sources,
particularly offshore wind, its renewable energy share is still below the EU average
and below EU targets. Additional efforts are therefore needed for the Netherlands to
ensure further roll-out of renewables and to achieve the EU 2030 renewable energy
targets. This could include measures to reduce financial risks in the offshore wind
sector to maintain the attractiveness of investments in the sector.
The congestion of the electricity grid has worsened, affecting both rural and urban
areas, and both the transmission and distribution networks. This hinders the clean
energy transition, constrains economic activity, and undermines the Netherlands’
competitiveness. Network operators are frequently forced to refuse grid access
requests from new electricity producers and consumers. Whereas grid congestion is
being addressed through a combination of investments in grid and regulatory
initiatives, it is expected that grid congestion will continue being a major challenge in
the short to medium term, therefore requiring continued attention and action. The
Netherlands could benefit from increasing the capacity of its transmission and
distribution grid, implementing flexibility solutions and reducing the level of loop
flows in a structural manner to maximise cross-zonal electricity trading over existing
cross-border infrastructure.
Excessive levels of nitrogen deposition, resulting mainly, but not exclusively, from the
intensive agricultural sector, remains a significant environmental challenge that
impacts the Netherlands’ economy at large. Excessive nitrogen deposition leads to the
over-fertilisation and acidification of soil and water bodies, while at the same time
putting significant constrains on the permitting of construction activities, delaying
needed infrastructure and impacting the country’s competitiveness. Surface and
ground water quality also remains a concern, with many water bodies failing to
comply with the Water Framework Directive and the Nitrates Directive. Therefore,
additional measures are needed to structurally address excessive nitrogen deposition
by the emitting sectors and to drive a transition to sustainable agriculture, including
organic farming. In particular, the Netherlands could benefit from adopting farming
practices that aim to cut nutrient and pesticide pollution and greenhouse gas emissions.
The share of Dutch workers with flexible or temporary contracts is nearly double the
EU average. In addition, there are various incentives in the Dutch labour market that
create an unequal playing field between employees and self-employed persons without
employees, enabling bogus self-employment and resulting in a relatively high share of
self-employed in the Dutch labour market. The widespread use of flexible employment
has contributed to labour market segmentation (i.e. the division of the jobs market into
different categories of workers with different levels of job security and/or access to
social and other benefits) and disproportionately affects vulnerable groups such as
workers with lower levels of skills and people with a migrant background. These
workers are more likely to be trapped in precarious jobs with limited access to
training, inadequate social protection, and a higher risk of in-work poverty and social
exclusion. The high prevalence of self-employed and flexible employment can also
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influence productivity growth, as these forms of employment often have fewer
opportunities for learning, development and training. The government is implementing
a package of measures to reduce incentives for self-employment and flexible
employment. This includes: i) various legislative changes to limit bogus self-
employment and reduce the differences between the self-employed and employees,
which are all covered by the Dutch recovery and resilience plan; and ii) a bill that aims
to provide job security for those working under flexible employment contracts.
Implementing these plans in a comprehensive and speedy manner is crucial to address
these persistent issues in the Dutch labour market.
(35)
Labour and skills shortages remain a significant challenge in the Netherlands,
affecting a wide range of sectors including healthcare, education, technology and ICT.
The Netherlands also stands out in this regard compared to peers, with Dutch
companies significantly more likely to report hiring difficulties compared to the EU
average. There are several structural factors affecting labour shortages, including
demographic trends, slow workforce growth and the low average number of hours
worked. These constraints are hampering productivity and competitiveness. Despite
high participation rates, the Netherlands has an untapped labour potential, especially
among people with a migrant background and part-time workers, particularly women.
To increase labour supply, people could be encouraged to work more hours, including
through policy measures that enables them to combine work with family and care
responsibilities and by promoting quality of work and better working conditions.
Attracting talent can also increase labour supply. Addressing labour shortages will
require a multifaceted approach that targets sector-specific barriers, and boosts
productivity-enhancing investments. Strengthening upskilling and reskilling
opportunities, particularly for people at the margins of the labour market, will be
essential to alleviate shortages, encourage sectoral mobility, and support long-term
economic resilience. Policy measures on the demand side could focus on promoting
high value-added sectors as well as sectors related to societal challenges, such as
education and healthcare, encouraging cross-sector mobility and increasing
productivity-enhancing and R&D investments.
The decline in basic skills in the Netherlands is one of the largest in the EU and
undermines education and labour market outcomes and competitiveness. Although the
Netherlands still has a relatively high share of top performing students, the number of
underachievers has sharply increased in mathematics, science and reading over the last
decade. Underachievement is four times more common among disadvantaged students
than among their peers. Teacher shortages are considerable and can impact student
learning outcomes and hinder access to quality education for all, as they vary by the
share of disadvantaged pupils in the schools and between regions. To address these
issues, the Netherlands could evaluate and review existing measures to improve basic
skills, such as the ‘Master plan for basic skills’ launched in 2022, and consider
measures to improve student learning outcomes, such as making it easier to transition
between different educational tracks, focusing on schools with a disadvantaged student
population.
The Netherlands faces a challenge in ensuring sufficient post-secondary graduates in
STEM fields, exacerbating skills shortages. Despite having a tertiary attainment rate
above the EU average, the country lags behind in the share of STEM graduates. In
particular, women and students with a migration background are underrepresented in
STEM fields. To address this issue, targeted education support can be provided,
including personalised guidance and tailored teaching processes. Such initiatives can
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help break down barriers and encourage underrepresented groups specifically to
pursue STEM studies.
(38)
In view of the close interlinkages between the economies of euro-area Member States
and their collective contribution to the functioning of the economic and monetary
union, in 2025, the Council recommended that the euro-area Member States take
action, including through their recovery and resilience plans, to implement the 2025
Recommendation on the economic policy of the euro area. For the Netherlands,
recommendations (2), (3), and (5) help implement the first euro-area recommendation
on competitiveness, while recommendations (1), (4) and (5) help implement the
second euro-area recommendation on resilience, and recommendation (1) helps
implement the third euro-area recommendation on macroeconomic and financial
stability set out in the 2025 Recommendation.
In light of the Commission’s in-depth review and its conclusions on the existence of
imbalances, recommendations under Article 6 of Regulation (EU) No 1176/2011 are
reflected in recommendation (1). Policies referred to in recommendation (1) help to
address vulnerabilities linked to high private debt in a context of an overvalued
housing market and vulnerabilities linked to the high current account surplus.
Recommendation (1) contributes to both addressing imbalances and implementing the
Recommendation on the economic policy of the euro area, in line with recital 38.
Reinforce overall defence spending and readiness in line with the European Council
conclusions of 6 March 2025. Ensure that net expenditure respects the path
recommended by the Council on 21 January 2025. Align the taxation of different
types of income from wealth, among others to reduce incentives for debt-financed
homeownership. Remove obstacles for the construction of new dwellings by
simplifying planning and permitting procedures. Support the development of an
affordable private rental sector, including by making investments in the sector more
attractive. Address the expected increase in age-related expenditure in long-term care
by making the system more cost-effective, including by allocating benefits more
efficiently.
In view of the applicable deadlines for the timely completion of reforms and
investments under Regulation (EU) 2021/241, ensure the effective implementation of
the recovery and resilience plan, including the REPowerEU chapter. Accelerate the
implementation of cohesion policy programmes (ERDF, JTF, ESF+), building, where
appropriate, on the opportunities offered by the mid-term review. Make optimal use
of EU instruments, including the scope provided by the InvestEU and the Strategic
Technologies for Europe Platform, to improve competitiveness.
Enhance public and private R&D intensity by targeting support to investments in key
strategic technologies. Address the funding gap for late-stage start-ups and scale-ups
by leveraging available financing tools and providing incentives to attract
institutional investors.
Reduce overall reliance on fossil fuels by accelerating the roll-out of renewables and
improving energy efficiency, particularly in buildings. Decrease electricity grid
congestion by increasing the capacity of the transmission and distribution grid,
implementing flexibility solutions, maximising cross-zonal trade, and further
simplifying permitting procedures. Implement structural measures to address
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HEREBY RECOMMENDS that the Netherlands take action in 2025 and 2026 to:
1.
2.
3.
4.
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excessive nitrogen deposition and the deterioration of water quality effectively,
especially by making further efforts for sustainable agriculture.
5.
Adopt and implement measures to reduce incentives to use flexible or temporary
contracts. Implement comprehensive measures to address labour and skills shortages,
including by tapping into underused labour potential, by strengthening upskilling and
reskilling opportunities for all through targeted and tailored active labour market
policies, and by encouraging mobility to high-productivity sectors and sectors related
to societal challenges. Improve basic skills, including by addressing teacher
shortages and tailored support to disadvantaged schools, and boost participation in
STEM programmes by targeted educational support and career advice, especially for
women and students with a migrant background.
Done at Brussels,
For the Council
The President
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