Greece's Shadow Economy: Uncovering the Hidden Billions
A €50 Billion Mystery: Unreported Income and Its Impact
In Greece, an estimated €45-50 billion, often referred to as "black money," is circulating within the country's shadow economy. This substantial amount, equivalent to nearly 20% of Greece's GDP, remains largely unseen by tax authorities. Despite significant advancements in digitalization and ongoing efforts to combat tax evasion, this issue persists.
The Scale of the Challenge
Recent data from the Centre of Planning and Economic Research (KEPE) paints a concerning picture. According to their findings, Greece's shadow economy stands at a staggering 20.9% of its GDP. This figure is approximately 3.3 percentage points higher than the EU average of 17.6%, placing Greece among the highest in Europe alongside countries like Italy and Poland.
Even more remarkably, Greece has achieved a significant reduction of 7.3 percentage points since 2003, yet its informal economy remains nearly double that of economic powerhouses like Germany and Ireland.
The Cost to the State
As an analysis in New Money highlights, the lost revenue to the Greek State each year due to the shadow economy is equivalent to:
- Two annual installments of the heating allowance subsidy
- A relief package worth a substantial €1.7 billion ($1.95 billion)
- A significant increase in public sector wages and pensions
The shadow economy encompasses a wide range of activities, from paying a babysitter in cash to waiters not declaring their tips, and even extends to illegal arms sales and money laundering. Yannis Stournaras, the central banker, emphasizes that tax evasion is an international problem, but Greeks spend a staggering €40 billion more than they declare as income.
In the period from 2015 to 2021, this excess spending ranged from €36 billion to €49 billion ($41-56 billion), according to the central banker.
But Here's Where It Gets Controversial...
A recent report by the Centre for Economic Policy Research (CEPR) reveals an even more alarming picture. The study found that Greece's shadow economy is larger than previously estimated by KEPE and the Bank of Greece.
According to the CEPR study, Greece's informal economy accounts for a staggering 36% of its GDP, more than double the average for developed nations (17%) and significantly higher than the EU average. The report highlights a worrying trend: between 1999 and 2020, Greece's informal economy expanded by 4%, despite efforts to promote digital transactions, tighten regulations, and introduce economic reforms.
Greece is not alone in this challenge. Italy follows closely, with its informal economy accounting for 31% of GDP. Spain and Portugal report 24%, while Lithuania, Latvia, and Bulgaria each have shadow economies making up 20% of their respective GDPs.
And This Is the Part Most People Miss...
The impact of the shadow economy extends beyond lost revenue. It undermines fair competition, distorts market dynamics, and can hinder economic growth and development. Addressing this issue is crucial for Greece's economic stability and future prosperity.
So, is Greece's shadow economy a hidden monster, or can it be tamed? What steps should be taken to address this complex issue? Share your thoughts and opinions in the comments below!
