Whatever Europe plans to do to reboot its innovation economy, it better do it fast.

According to the latest EU Innovation Scorecard released today, the European Commission found that “the number of innovative firms is in decline” across a continent hungry for job growth and an economic boost.

The problem runs across the board as Europe is suffering a drop in “patent applications, exports of high-tech products, venture capital investments and sales of innovative products,” according to the report.

The brightest spot remains Sweden, which the report ranks as Europe’s most innovative country.

“In the overall ranking, Sweden is once more the innovation leader, followed by Denmark, Finland and Germany,” the report says. “The fastest growing innovators are Malta, Latvia and Bulgaria, Ireland, the UK and Poland.”

The release of the scorecard comes one day after the EC formally proposed plans to create a Digital Single Market. The set of 16 reforms would create a more unified set of rules governing digital goods and services in the EU’s 28 member states in part to give homegrown tech companies a boost.

“The European Commission has now agreed its strategy for this ambitious project,” said Andus Ansip, EC vice president for the Digital Single Market in a speech at the European Business Summit in Brussels today. “It will not only resolve some urgent short-term problems but also prepare Europe for a bright digital future. Getting rid of years of national legal differences around the EU to create an open accessible digital environment, with no restrictions or discrimination: that will not happen overnight.”

Too bad, because based on the scorecard, Europe needs help now.

The EU uses 25 different indicators such as patents, venture capital, and exports to measure and rank countries along an innovation index.

In the latest report, it placed each country into one of four categories:

  • Innovation Leaders: Denmark, Finland, Germany, and Sweden.
  • Strong Innovators: Austria, Belgium, France, Ireland, Luxembourg, Netherlands, Slovenia, and the United Kingdom.
  • Moderate Innovators (considered below EU averages): Croatia, Cyprus, Czech Republic, Estonia, Greece, Hungary, Italy, Lithuania, Malta, Poland, Portugal, Slovakia, and Spain.
  • Modest Innovators (well below average): Bulgaria, Latvia, and Romania.

The report also notes that globally, EU ranks behind the U.S., Japan, and South Korea. And while it’s ahead of China, that country is rapidly closing the gap.