A new report by the Centre for Economic Policy Research (CEPR) highlights the scale of the shadow economy across the European Union, with Greece leading the rankings. The informal economy remains one of the most damaging phenomena for national economies, depriving governments of revenue, deepening inequality, and undermining trust in institutions.

Greece: Leading the Shadow Economy in Europe at 36% of GDP

According to the study, Greece‘s shadow economy accounts for a staggering 36% of its Gross Domestic Product (GDP), more than double the average for developed nations (17%) and significantly above the EU average. Despite efforts to implement digitalization, tighten regulatory oversight, and introduce institutional reforms, the scale of unregistered economic activity in Greece remains alarmingly high.

Other Countries Affected

Following Greece, Italy ranks second with an informal economy comprising 31% of its GDP, while Spain and Portugal both register at 24%. Lithuania, Latvia, and Bulgaria each report a shadow economy size of 20%.

In contrast, major Western European economies report significantly lower figures. France’s shadow economy stands at 14%, Germany at 13%, and Central and Northern European countries—including Austria, Denmark, Slovenia, Sweden, and Switzerland—register rates between 9% and 6%. Belgium reports the lowest level of informal economic activity in Europe, at just 5%.

The Impact of the Shadow Economy

The shadow economy encompasses:
• Tax evasion
• Unregistered labor
• Undocumented transactions
• Circulation of unaccounted-for cash

Its consequences are far-reaching, reducing government tax revenues, disadvantaging law-abiding businesses, and weakening public services such as healthcare, education, and social welfare.

A Longstanding Issue

The report notes that between 1999 and 2020, Greece saw a 4% increase in the size of its shadow economy. Spain and Latvia experienced the highest increases, both at 7%, while more developed economies like Germany, Austria, and Belgium recorded only a 1% rise.

Greece’s persistent shadow economy reflects deeper structural inefficiencies, ranging from tax compliance culture and enforcement mechanisms to broader trust in state institutions. If Greece aims to boost revenues, strengthen social cohesion, and restore economic fairness, addressing its informal economy must become a top national priority.