January 27, 2015
WASHINGTON, JAN. 27, 2015—Europe became more economically free last year, but factors such as costly labor regulations and high tax burdens are stifling its progress, according to the 2015 Index of Economic Freedom, published by The Wall Street Journal and The Heritage Foundation.
The vast majority of the region’s economies are at least “moderately free” by Index standards. But the editors note that growing tax and labor burdens, along with high public spending and market-distorting subsidies, have brought stagnant growth and mounting debt. In many countries, they say, there is a serious need to cut spending.
Countries that have enacted policies to curtail spending and shrink government -- such as Estonia, Lithuania and Latvia -- “are on the move toward greater economic freedom,” the editors write. They have overcome severe recessions, moving up in the Index rankings every year since 2012, and outperforming older members of the European Union such as Spain, Portugal, France and Italy.
The region is led by Switzerland, which ranks fifth worldwide and is Europe’s only “free” economy. Many of its other economies, including Ireland (another global top-ten finisher), Denmark, United Kingdom and Germany, logged higher scores this year. But it also features four “mostly unfree” economies (Russia, Greece, Moldova and Bosnia/Herzegovina) and two “repressed” ones (Ukraine and Belarus, whose 0.3-point loss moved it into the “repressed” category).
Launched in 1995, the Index evaluates countries in four broad policy areas that affect economic freedom: rule of law; limited government; regulatory efficiency; and open markets. There are 10 specific categories: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. Scores in these categories are averaged to create an overall score.
Economic freedom grew in 25 of Europe’s 43 countries, declined in 17 others, and remained the same in one (Finland). Switzerland’s 1.1-point drop from its all-time high score of 81.6 in the 2014 Index places it 0.6 points from losing its “free” status. Among the countries that charted scores at least one point lower: Austria, Belgium, Armenia, Macedonia, Luxembourg, Albania, Turkey, France, Greece and Slovenia (a 2.4-point decline, the region’s worst).
The world average score of 60.4 is only one-tenth of a point above the 2014 average, but represents a 2.8-point overall improvement since the inception of the Index in 1995. Thirty-seven countries, including Taiwan, Israel, Poland and Colombia, achieved their highest-ever Index scores. Among the 178 countries ranked, scores improved for 101 countries and declined for 73.
The 2015 Index was edited by Ambassador Terry Miller, director of Heritage’s Center for Trade and Economics and Center for Data Analysis; and Anthony B. Kim, senior policy analyst in the Center for Trade and Economics. Copies of the Index (492 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, also is available online.