FNF Publication: The European Union – Catalyst for Economic Freedom?


Friedrich Naumann Foundation for Freedom proudly presents its latest publication: The European Union – Catalyst for Economic Freedom? As the name itself suggests, the collection of papers, including contributions by by Steffen Hentrich, Emmanuel Martin, Danko Tarabar and Andrew Young, is devoted to the issue of economic freedom within the EU. Enjoy the preface to the edition.



by Hans H. Stein, Director Regional Office European Institutions and North America, Friedrich Naumann Foundation for Freedom

The Economic Freedom of the World Report 2014 was launched in Brussels on 7 October at an event organized by the Friedrich Naumann Foundation for Freedom and the Fraser Institute. Olli Rehn, Vice-President of the European Parliament, insisted on the importance of keeping up the reform process in the EU and its member states in order to improve Europe’s competitiveness and ultimately its wealth. In his view, the biggest challenge for the EU will be to “reform its economic and social model without giving up the social market economy on which the EU is based”.

Although most EU member states rank within the top 40 out of 151 countries in the Economic Freedom in the World Index, many countries still perform poorly on economic freedom in Europe. It is striking that between the highest ranking EU member state in the Index 2014, Finland on rank 10, and the lowest, Slovenia on rank 105, the gap in economic freedom remains big within the EU. Scandinavian countries, although well-known for their large welfare states, are in the lead with regard to economic freedom, while most progress in economic freedom in the EU has been achieved in new member states. For the first time, the Friedrich Naumann Foundation for Freedom publishes a detailed analysis of the state of economic freedom in Europe and asks the question of the European Union’s impact on economic freedom in its member states.

This collection of papers attempts to give insight into the close interlinkage between institutions and economic freedom, both at the European as well as the country level.

Steffen Hentrich’s article offers a broad overview of the state of economic freedom in the EU and provides data analysis of the various policy areas and attempts at assessing the EU’s impact on economic freedom in each of these areas. Even if the EU member states, with the notable exception of Finland, do not belong to the top-10-group of the Economic Freedom in the World Index, most EU countries qualify for the freest quartile of the index. Over the years, economic and political integration in the European Union has been influential for economic freedom in Europe. Steffen Hentrich attempts to answer the question if the EU has contributed to convergence in economic freedom through harmonization of economic and political institutions.

Andrew T. Young and Danko Tarabar’s contribution studies economic freedom in 42 European countries and estimates the relationship between EU membership and the increase in economic freedom on the one hand and the level of convergence with the top countries in economic freedom on the other hand. The authors find that while economic freedom levels have increased meaningfully throughout Europe in the period 1970-2010 and the level of dispersion of economic freedom across European countries has decreased, these trends are difficult to attribute to the EU as an institutional body.

In his case study on France, Emannuel Martin discusses the interlinkage between what he calls the “dysfunctional” institutional framework and the lack of economic freedom in France. In his view, the measure of a nation’s economic freedom is a good proxy for its institutional quality. He concludes by underlining the importance of thorough reforms instead of mere make-up reforms to increase transparency and accountability, which in turn should overall increase the levels of economic freedom.

The full publication is available here: https://fnfeurope.files.wordpress.com/2015/01/the-european-union-catalyst-for-economic-freedom-compressed.pdf

Friedrich Naumann Foundation for Freedom