Greece Tops EU Rankings for Shadow Economy, New Report Reveals

A recent report by the Centre for Economic Policy Research (CEPR) sheds light on the scale of the shadow economy across the European Union, with Greece emerging as the country with the highest level of informal economic activity.

The shadow economy—consisting of unregistered businesses, undeclared wages, and tax evasion—remains a major challenge, weakening public finances, deepening inequality, and eroding trust in institutions.

Greece: The largest shadow economy in Europe

According to the study, Greece’s shadow economy accounts for 36 percent of its Gross Domestic Product (GDP)—more than double the average for developed nations (17 percent) and significantly higher than the EU average.

The report highlights 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. Spain and Latvia recorded the largest increases at 7 percent, while more regulated economies such as Germany, Austria, and Belgium saw only a 1 percent rise.

How other EU countries compare

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.

By contrast, Western and Northern European economies maintain much lower levels of informal economic activity. France stands at 14 percent, Germany at 13 percent, and a group of highly regulated economies—including Austria, Denmark, Slovenia, Sweden, and Switzerland—report figures between 9 percent and 6 percent. Belgium ranks the lowest, with an informal economy making up just 5 percent of GDP.

Despite policy efforts across Europe, the persistence of shadow economies underscores the challenge of enforcing tax compliance, improving labor market transparency, and building stronger institutional trust. For Greece, tackling this issue remains key to achieving sustainable economic growth and financial stability.

Bank of Greece’s lower estimate for the shadow economy

The size of the shadow economy in Greece reaches 20.9 percent of the country’s Gross Domestic Product (GDP), Bank of Greece governor Yannis Stournaras said recently.

Shadow economy, which Greeks call “black money”, can range from paying a babysitter in cash, or waiters not declaring their tips, to illegal arms sales and money laundering.

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 2015-21, this excess spending ranged from €36 billion to €49 billion, the central banker said.

Greece attempts to reduce tax evasion

Tax evasion not only diverts public revenues but also represents missed opportunities for Greece, newly appointed Finance Minister Kyriakos Pierrakakis noted recently.

“Tax evasion undermines social justice and deprives education, healthcare, and infrastructure of valuable resources,” Pierrakakis added.

Pierrakakis highlighted that the fight against tax evasion is progressing day by day through a combination of human effort and advanced technological tools.

“AADE (the Independent Authority for Public Revenue) is leveraging both highly trained staff and modern tools, including Artificial Intelligence and the new state-of-the-art operations center,” Pierrakakis noted.

He added that additional tax revenues in 2024, driven by a reduction in tax evasion through the expansion of online transactions and cash register connections to POS systems, had surpassed €2 billion.

“I can assure you that as tax evasion decreases, taxes will also decrease,” he added.

Tax evasion in nightclubs

Sweeping inspections by tax authorities at many of the most popular nightclubs in Athens and Thessaloniki since January have determined that tax evasion at such venues remains rampant.

AADE combined high-tech remote monitoring with on-site inspections to conduct regular checks on 21 of the highest-earning clubs in both cities.

Launched on January 11 and repeated every Saturday for weeks, the operation – dubbed “Saturday Night Fever” – found that these venues systematically avoided issuing receipts. In the first week, receipts totaled approximately €821,000 but exceeded €1 million on subsequent Saturdays as inspections continued.

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