European Commission and REFOR 3 June 2026, Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Germany

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The European Commission, acting under Articles 121(2) and 148(4) TFEU and Regulation (EU) 2024/1263, recommends that the Council issue country-specific recommendations to Germany for 2026–2027 addressing fiscal consolidation, defence spending, public investment quality, pension sustainability, labour market incentives, innovation, digitalisation, housing, energy transition, and skills. The fiscal framework context is defined by the activation of the national escape clause (10 October 2025), which permits Germany to deviate from recommended maximum net expenditure growth rates to accommodate increased defence spending, notwithstanding a projected general government deficit exceeding the 3% of GDP reference value in 2026. The Commission finds no case to open an excessive deficit procedure, as the projected excess is fully explained by increased defence expenditure since 2021 within the terms of the activated escape clause.AI