The Council of the European Union has adopted a recommendation for Slovenia's economic, social, employment, structural and budgetary policies for 2026 and 2027, urging the country to rein in its deficit, shift taxation away from labour, and simplify administrative procedures. The recommendation, published on 3 July 2026, sets out concrete fiscal targets and structural reforms to address persistent imbalances.
Under the recommendation, Slovenia must ensure net expenditure growth respects the maximum rates of 4.4% in 2026 and 4.1% in 2027, as deviations of 1.2% of GDP in 2026 and 1.7% cumulatively for 2024-2026 have been projected. The general government deficit is forecast at 3.3% of GDP in 2026 and 3.5% in 2027, breaching the 3% threshold, and the Commission may open an excessive deficit procedure in autumn 2026 if corrective measures are insufficient.
On taxation, the Council calls for reducing reliance on labour taxes, which accounted for 52% of total tax revenues in 2023, by broadening the tax base through a systematic review of tax expenditures (5.2% of GDP in 2023) and adjusting recurrent property taxes. Spending efficiency should be improved by institutionalising regular reviews in social protection (17.1% of GDP), healthcare (8%), economic affairs (5.7%), and education (5.5%), while better targeting social benefits to reverse a four-year rise in the at-risk-of-poverty rate.
66% of companies report complexity as a constraint, so the Council recommends simplifying permitting processes and digitalising public services. Defence spending, projected at 1.6% of GDP in 2026 (up 0.5 percentage points from 2021), can be supported via the national escape clause activated for 2025-2028, but without jeopardising long-term sustainability. Energy tax reductions, costing 0.2% of GDP in 2026, should be phased out to avoid inefficient fiscal costs. Cohesion policy implementation under ERDF, JTF, ESF+, and the Cohesion Fund must maintain momentum, with rapid deployment of new investments from the mid-term review.
Stakeholder impact The recommendation affects several groups. Slovenian taxpayers may see a shift from labour taxes to property taxes, potentially lowering the tax wedge on wages but increasing costs for property owners. Businesses, especially SMEs, stand to benefit from reduced administrative complexity and faster permitting, though they may face higher energy costs as untargeted tax reductions are phased out. Social benefit recipients could experience tighter targeting, which may reduce poverty rates but also create transitional hardships for some households. The defence sector will gain from increased spending, while other public services may face pressure to improve efficiency without additional funding.
Institutional follow-up The Council recommendation is non-binding but carries political weight. Slovenia is expected to reflect these priorities in its Stability Programme and National Reform Programme. The Commission will monitor compliance and may propose an excessive deficit procedure in autumn 2026 if the deficit is not corrected. The European Parliament will also review the recommendation as part of the European Semester cycle.