On 24 June 2026, the Council of the European Union adopted a recommendation outlining economic, social, employment, structural and budgetary policies for Slovakia, urging the country to address macroeconomic imbalances and ensure fiscal sustainability. The recommendation sets binding net expenditure growth limits and calls for reforms in taxation, housing, social welfare, and cohesion fund delivery, affecting households, businesses, and public finances.
The recommendation, prepared by the Economic and Financial Affairs Council (Ecofin), is part of the European Semester cycle. It follows the Commission's spring package and the Council's adoption of country-specific recommendations for all member states. The document, dated 22 June 2026, is a formal Council note.
Fiscal targets and defence spending The Council recommends that Slovakia keep net expenditure growth within prescribed ceilings: 3.8% in 2025, 0.9% in 2026, 1.6% in 2027, and 1.5% in 2028, cumulating from a 2023 base. The excessive deficit procedure remains suspended. To accommodate higher defence outlays, the Council authorises use of the national escape clause, activated on 8 July 2025 for 2025-2028, allowing reprioritisation or revenue increases for lasting defence investment without jeopardising fiscal sustainability.
Tax and social reforms The Council urges Slovakia to reduce the tax wedge for low-income earners, shift property taxation from area-based to market-value basis, and increase environmental taxes. It recommends simplifying the VAT system, including raising the standard rate from 20% to 23%, improving compliance (the VAT gap exceeds the EU average of 8.2%), and advancing digitalisation through e-invoicing and pre-filled returns. On social welfare, the Council calls for better targeting of benefits such as the 13th pension and energy subsidies, which currently cover 90% of households, to focus on vulnerable groups.
Housing and cohesion Slovakia faces a severe housing shortage, with the lowest housing stock per capita in the EU and only 7,241 new dwellings started in the first half of 2025. The Council recommends implementing the new Building Act and expanding rental and social housing, noting that rental dwellings fell to 0.86% of total stock in 2021 and social housing represents just 2.5%. On cohesion policy, the Council urges faster implementation of ERDF, JTF, ESF+, and CF programmes, as project selection and payments lag behind EU averages, and calls for swift deployment of Just Transition Fund resources by end-2026.
Macroeconomic outlook The recommendation highlights persistent vulnerabilities: the government deficit stood at 4.5% of GDP in 2025, projected to rise to 4.6% in 2026 and 5.4% in 2027; public debt reached 61.4% of GDP at end-2025, forecast to climb to 66.9% by end-2027; inflation was 4.2% in 2025, expected at 4.3% in 2026; and house prices surged in 2025. The current account deficit narrowed in 2025 but is expected to widen again in 2026.
Stakeholder impact For Slovak households, the VAT increase and reduced energy subsidies will raise living costs, while better-targeted benefits may protect the most vulnerable. Businesses face higher VAT compliance costs from digitalisation but benefit from a lower tax wedge for low-wage workers. The construction sector could see a boost from housing reforms and cohesion fund acceleration. Public administration must implement complex tax and benefit reforms while managing tighter expenditure limits.
Institutional follow-up The recommendation is non-binding but carries political weight. Slovakia is expected to report on progress in its National Reform Programme and Stability Programme. The Commission will monitor compliance and may propose further steps if imbalances persist. The Council will review implementation in the next European Semester cycle.