Greece's Underground Economy Grows


Greece does not have the means to police its underground economy, which is considered very large compared to the size of the country. Austerity measures that cut the size of government will make enforcement of tax laws even more difficult. That is too bad because there is a lot of money to be had if only Greece could get cash from parts of its economy that are largely hidden from sight.

A new study by accounting firm Global Financial Integrity (GFI) claims:

The Greek economy lost US$261 billion to crime, corruption, and tax evasion from 2003-2011.

That may not seem a large amount by U.S. standards, but Greece's gross domestic product was only $310 billion (nominal) last year and is shrinking rapidly.

GFI says that something strange has happened recently. There were "massive illicit inflows of US$90 billion in 2010 and US$109 billion in 2011."

Expert Dr. Kar, who worked as a former senior economist at the International Monetary Fund before joining GFI reports:

Given the massive illicit flows into and out of Greece, there is every reason to believe that Greece's underground economy is likely to continue growing at an increasing rate.

Greece's economy has become so corrupt that it is worth the investment of criminal elements to mine the riches of potential illegal activity there.

These facts never come up when the IMF, European Union and European Central Bank analyze the country's financial health as part of their decisions to offer new bailout activity. They should. Perhaps the countries and organizations that want to fix Greece's economy should consider all of the root causes and how to remedy them.

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, International Markets Tagged: featured