Greece continues to rank among the highest in Europe. Credit: Greek Reporter
An estimated €45–50 billion in “black money,” or unreported income within Greece’s shadow economy, is currently in circulation, accounting for nearly one in every five euros of GDP that escapes tax authorities’ oversight. This persists despite major strides in digitalization and ongoing efforts to combat tax evasion.
Recent data from the Centre of Planning and Economic Research (KEPE) underscores the scale of the challenge: the shadow economy in Greece stands at 20.9% of GDP. This is approximately 3.3 percentage points higher than the EU average, which currently sits at 17.6%.
Greece continues to rank among the highest in Europe, alongside countries like Italy and Poland. Remarkably, even with a significant reduction of 7.3 percentage points since 2003, Greece’s informal economy remains nearly double that of Germany or Ireland.
As an analysis in New Money notes, in practical terms, this lost revenue to the State each year is equivalent to:
Two annual installments of the heating allowance subsidy
A relief package worth €1.7 billion ($1.95 billion)
A substantial increase in public sector wages and pensions
The shadow economy can range from paying a babysitter in cash or waiters not declaring their tips to illegal arms sales and money laundering. Yannis Stournaras, the central banker, said that the problem of tax evasion is an international one, but noted Greeks spend €40 billion more than they declare as income.
In the period 2015-2021, this excess spending ranged from €36 billion to €49 billion ($41-56 billion), the central banker said.
Is Greece’s shadow economy larger than assumed?
A recent report by the Centre for Economic Policy Research (CEPR) found that the shadow economy in Greece is larger than the estimates of KEPE and the Bank of Greece.
According to the study, Greece’s shadow economy accounts for 36 percent of its GDP—more than double the average for developed nations (17 percent) and significantly higher than the EU average. The report highlighted a worrying trend: between 1999 and 2020, Greece’s informal economy expanded by 4 percent, despite efforts to promote digital transactions, tighten regulatory frameworks, and introduce economic reforms.
Greece is followed by Italy, where the informal economy accounts for 31 percent of GDP. Spain and Portugal both report 24 percent, while Lithuania, Latvia, and Bulgaria each have shadow economies making up 20 percent of GDP.