Europe's 'black economy' shrank in 2012

Undeclared economic activity, the so-called "black economy", in Europe shrank last year to 19.0 percent of declared output from 19.3 percent in 2011, a study for the Visa credit card company indicated on Monday. The study also showed that thanks to an improved economic environment and the application of anti-fraud measures, the parallel economy may this year be the smallest for a decade, accounting for about 18.5 percent of the combined gross domestic product (GDP) of the European Union, Norway, Switzerland, Turkey and Croatia. In absolute terms, the study -- by economics professor Friedrich Schneider at the Johannes Kepler University of Linz in Austria -- found that illegal work and undeclared transactions represented about 2.175 trillion euros ($2.85 trillion. The construction and commercial sectors accounted for the bulk of undeclared work and payments, it said. The study concluded that the phenomenon is much more common in eastern and central Europe, where the parallel economy in Bulgaria, Croatia, Estonia and Lithuania is equivalent to almost 30 percent of GDP. To estimate the size of the black economy, researchers base their calculations on macroeconomic data and statistical forecasts.