Denmark is the EU's most competitive and dynamic economy, according to the World Economic Forum (WEF).
The Danish are both dynamic and happy
Denmark has done most to meet the goals of the EU's Lisbon strategy, which commits the union to far-reaching economic and social reforms by 2010.
Among Europe's largest economies, Germany ranked fifth in the WEF survey while the UK and France came sixth and ninth respectively.
WEF said EU members needed to do more to foster enterprise and innovation.
The EU's economic vision, set out in Lisbon in 2000 and subsequently revised, challenges it to become the world's most "competitive and dynamic knowledge-based economy".
It is designed to address the low growth and poor job creation records of many EU nations.
The WEF ranked the EU's existing 25 members, new members Bulgaria and Romania, and candidate countries Turkey and Croatia, on a range of criteria including liberalizing markets, increasing social inclusion and enhancing sustainable development.
Source: World Economic Forum
Denmark scored highly in all areas and was found to have done most to boost enterprise.
The UK topped the rankings in terms of strength in financial markets but came only ninth in terms of promoting social inclusion.
Germany scored strongly in sustainable development and market liberalisation but was ranked only 12th in terms of stimulating enterprise.
WEF said the figures showed that some of the EU's newest members, such as Estonia and Slovenia, were making more progress on economic reform than more established countries.
Poland, which joined the EU in 2004, was founded to be lagging behind both Croatia and Turkey - both of which are unlikely to be admitted before 2010.
"The assessment indicates that EU attention should be focused on three areas," said Jennifer Blanke, senior economist at WEF's Global Competitiveness Network.
"Improving the environment for innovation and research & development, developing a stronger information society and creating an enterprise environment that is more conducive for private sector economic activity."