The EU has reiterated that the Government should reinforce "defence spending and readiness" and gradually adapt the annual budget to "sustain structurally higher defence spending."
The recommendation is part of the annual exercise coordinating member state budgetary, social and economic policies.
National capitals have been aligning their social and economic policies more closely, under supervision from the European Commission, since the financial crisis in 2008-2010.
Each year, member states, including Ireland, endorse a set of policy recommendations as part of the so-called European Semester.
The following Spring, member states assess how far national capitals have complied with the proposals.
In July last year, member states recommended that Ireland "take action in 2025 and 2026 to reinforce overall defence and security spending and readiness" in line with the communiqué by EU leaders, including Taoiseach Micheál Martin, during a summit devoted to EU defence in March of 2025.
The emphasis on greater defence spending and readiness is part of the EU's overall response to Russia’s invasion of Ukraine, and the Trump administration’s threatened disengagement from European security.
In April, the government submitted its Annual Progress Report on its adherence to the recommended national spending levels and "the implementation of reforms and investments responding to the main challenges identified in the European Semester country-specific recommendations."
Adopting today’s 2026 European Semester Spring Package, the European Commission declared that with the current geopolitical uncertainty, the policy guidance for each member state had a particular focus on "strengthening the EU's competitiveness, strategic autonomy, as well as economic and social resilience and cohesion, while maintaining fiscal sustainability."
The report also focuses on key aspirations on boosting Europe’s competitiveness, which EU leaders have endorsed, and which will be central themes in Ireland’s upcoming EU presidency.
These include "unlocking the full potential of the Single Market, closing the innovation gap, accelerating decarbonisation and reducing strategic dependencies, while promoting jobs and skills, tackling the housing crisis and ensuring social fairness and cohesion."
Concerns over reliance on corporate taxation and dependence on fossil fuels
The report on Ireland states that the country is at risk of an over-reliance on a small number of multinationals for its corporate tax receipts.
Today’s report says "the reliance of Ireland’s government revenue on corporate taxation from foreign-owned multinational enterprises continues to pose risks to the stability of public finances.
"The exceptionally high corporate income tax (CIT) revenue is coming from a relatively few large companies in the pharmaceutical and ICT sectors and a substantial portion of receipts is estimated to be windfall, i.e. in excess of what can be explained by domestic economic activity.
"As a result, CIT revenue could be highly influenced by international developments such as changes in the global trade and tax environment."
The report says that the concentration of corporate tax receipts also has implications for income tax revenue, given the contributions to "labour earnings" by multinationals.
It warns that while the government has been channelling part of these windfall revenues to the Future Ireland Fund in order to mitigate fiscal risks, most of the remaining windfall revenues will be spent according to the government’s medium-term Fiscal Structural Plan.
"To reduce the reliance of the budget on potentially transient revenue, Ireland would benefit from diversifying its budget revenue source," the report states.
The report also highlights the need to implement cost effectiveness in the health system "while accelerating the transition towards universal and accessible primary healthcare."
It also calls for an overall reduction in Ireland’s dependence on fossil fuels, suggesting the government accelerates the use of renewables "including through a streamlined permitting framework", while also removing "remaining regulatory barriers to non-fossil flexibility" and speeding up the modernisation and expansion of grid infrastructure.
The report suggests Ireland should boost energy efficiency in private and public buildings and invest in district heating solutions, in order to "leverage the potential for decarbonisation of heating."
It calls on the government to further increase the supply of affordable and social housing, "while preventing and reducing housing exclusion of vulnerable groups."
The report suggests the government should address capacity constraints in the residential construction sector by improving access to infrastructure, land management, planning, financing conditions, labour supply and construction methods.
The European Commission’s spring economic forecast suggested that Ireland’s real GDP would decline by 1.2% in 2026 and grow by 3.4% in 2027 with corporate tax receipt inflation standing at 3.5% in 2026 and 2.6% in 2027.
Ireland’s government surplus fell from 4.1% of GDP in 2024 to 1.8% of GDP last year, due to the "absence of the high one-off revenue seen in 2024."
