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January 10, 2013

Europe Narrows Gap as No. 2 in Economic Freedom

For Immediate Release
Contacts:
Jim Weidman, (202) 675-1761, jim.weidman@heritage.org
Kate Dobbin, +44 207 573 4016, kate.dobbin@dowjones.com

EUROPE NARROWS GAP AS NO. 2 IN ECONOMIC FREEDOM

Eight nations notch their best scores; Cyprus, Ireland drop the most

WASHINGTON, JAN. 10, 2013—Better than average showings in regulatory efficiency and open markets helped make Europe the world's most improved region in the 2013 Index of Economic Freedom, published annually by The Wall Street Journal and The Heritage Foundation.

Economic freedom grew in 32 countries in Europe, contributing to the region's 0.5-point advance in overall score, while nine countries -- Cyprus and Ireland most dramatically -- lost economic freedom. Europe narrowed the gap with North America to place second among six regions in economic freedom.

Launched in 1995, the Index evaluates countries in four broad areas of economic freedom: rule of law; regulatory efficiency; limited government; and open markets. Based on its aggregate score, each of 177 countries graded in the 2013 Index was classified as "free" (i.e. combined scores of 80 or higher); "mostly free" (70-79.9); "moderately free" (60-69.9); "mostly unfree" (50-59.9); or "repressed" (under 50).

"A significant realignment of European countries is under way in terms of economic freedom," Index editors wrote. "Sweden, Germany, Georgia, the Czech Republic, Norway, Poland, Romania and Bulgaria all recorded their highest economic freedom scores ever. Unfortunately France, Greece, Italy, Portugal and the United Kingdom all registered scores about the same or lower than those they first registered nearly two decades ago when the Index began recording economic freedom."

Ireland's drop from ninth place to 11th in worldwide ranking left the "eurozone" without an economy in the Index's Top 10.

The rule of law in Europe was undermined by a higher level of perceived corruption and weaker protection of property rights, Index editors cautioned, and stagnant growth exacerbated an ongoing debt crisis. Europe continues to rank last among the six regions in two indicators of limited government: fiscal freedom and government spending,

In the European region, 35 of 43 scored countries -- 81 percent -- rank as "moderately free" or "mostly free." Ten economies rank among the world's 20 freest. Europe has two "repressed" economies: Ukraine and Belarus.

Switzerland again is rated as the only "free" economy in Europe, and ranks fifth in the world. Denmark rose to ninth. Five European countries had notable changes in status: Georgia, Norway and the Czech Republic became "mostly free" economies. Cyprus dropped 2.8 points into the "moderately free" category, while Italy regained that status. Georgia had the largest score improvement in the 2013 Index. Estonia and Poland also were among the world's 10 most improved.

Greece – embroiled in a sovereign debt crisis – did not budge within the "mostly unfree" category. The scores of Spain, Slovenia and Belarus all fell by at least one point.

All told, Europe exceeds the world average in eight of 10 categories, with margins of 14 or more points in property rights, freedom from corruption, investment freedom and financial freedom.

The world average score of 59.6 was only one-tenth of a point above the 2012 average. Since reaching a global peak in 2008, the editors note, economic freedom has continued to stagnate. The overall trend for last year, however, was positive: Among the 177 countries ranked in the 2013 Index, scores improved for 91 countries and declined for 78. On the plus side, average government spending scores improved. Unfortunately, this was matched by a decline in regulatory efficiency, as a number of countries hiked minimum wages and tightened control of labor markets.

The 2012 Index was edited by Ambassador Terry Miller, director of Heritage's Center for International Trade and Economics; Kim Holmes, Ph.D., Heritage's Distinguished Fellow; and Edwin J. Feulner, Ph.D., Heritage's president. Copies of the Index (494 pages, $24.95) may be ordered online at www.heritage.org/index or by calling 1-800-975-8625. The full text, including charts and graphs, is available online.


About The Wall Street Journal

The Wall Street Journal is the world's leading business publication with more than two million subscribers and is the largest U.S. newspaper by total paid circulation. The Wall Street Journal franchise comprises The Wall Street Journal, The Wall Street Journal Asia, The Wall Street Journal Europe, and The Wall Street Journal Online at WSJ.com, the leading provider of business and financial news and analysis on the Web with more than one million digital subscribers and 36 million visitors per month worldwide. WSJ.com is the flagship site of The Wall Street Journal Digital Network, which includes MarketWatch.com, Barrons.com, AllThingsD.com and SmartMoney.com. The Journal holds 34 Pulitzer Prizes for outstanding journalism, and in 2012, was ranked No. 1 in BtoB's Media Power 50 for the 13th consecutive year.

About The Heritage Foundation

The Heritage Foundation is the nation's most broadly supported public policy research institute, with more than 710,000 individual, foundation and corporate donors. Founded in 1973, Heritage develops public policy solutions that advance free enterprise, limited government, individual freedom, traditional values and a strong national defense.

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