Sweden, which also led last year's list, pipped Denmark and Finland to the top EU spots as WEF gave the Nordic nations high marks for innovation and cooperation between the business and tertiary education sectors.
"The Nordic countries have also achieved a high level of social inclusion, with low unemployment (especially in Denmark, pioneer of the “flexicurity” system) and strong participation of women in the workforce (especially in Finland and Sweden)," WEF said in a statement.
"These countries also have developed highly-skilled workforces through top-notch educational systems and strong on-the-job training programmes."
The 27 EU countries were measured in terms of their success in relation the EU's competition benchmark, commonly referred to as the Lisbon criteria.
However, in its fifth and final biennial review, WEF found that the EU as a whole had failed to measure up to its goal of becoming the most competitive economy in the world.
“In 2000, the EU set for itself an ambitious action and development plan with the Lisbon Agenda. As this Review indicates, while some progress has been made, much remains to be achieved in order to fully harness Europe’s economic potential."
The World Economic Forum is a non-profit foundation best know for its annual meeting in Davos in the Swiss Alps, where business leaders and intellectuals converge to discuss potential resolutions to global problems.
Rank 2010 (Source: World Economic Forum)
9. United Kingdom
15. Czech Republic
19. Slovak Republic