Wednesday

29th Mar 2017

UN highlights economic cost of organised crime in Italy

With Italy increasingly being seen by markets as the next Greece, a major UN report has highlighted how organised crime is harming the Italian economy.

The study by the UN Office on Drugs and Crime in Vienna out on Tuesday (25 October) estimates that organised crime in Italy - mostly illegal waste disposal, drugs and people trafficking - is worth €116 billion a year, equivalent to 7.7 percent of the country's GDP.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The scale of the problem is far larger than in other industrialised nations - organised crime accounts for 1.3 percent of the economy in Germany, 1.2 percent in the UK and 2.3 percent in the US.

The UN notes that crime has short-term positive effects: Money laundering sees dirty income invested in small businesses, creating jobs, or saved in banks, easing credit flows and liquidity.

But the medium and long term effects are destructive.

Criminal groups tend to invest cash in businesses where it can most easily be hidden - real estate, restaurants, transport companies - rather than where it will generate the most profit.

Criminally-backed enterprises damage competitiveness by driving legitimate firms out of business. "Front companies may offer their goods and services at below-market rates or even at a loss because their primary objective is to launder money. Such companies do not need to compete properly in the marketplace," the UN said.

The lack of transparency also distorts national economic data, macroeconomic analysis and policy-making. Crime aggravates volatility because "criminal flows may be suddenly disrupted and related investments may disappear due to law enforcement actions." Meanwhile, corruption of legal institutions and bribing of "friendly" political parties "can have a negative impact on overall tax morality" and scare away foreign investors.

On top of this, the price of booming illegal drugs consumption in terms of the burden on national health services and the petty crime it generates can cost up to 3.5 percent of GDP.

"International rating agencies will use this information to downgrade the credit risk of the countries concerned," the UN warned.

In global terms, the study notes that organised crime is worth around $2.1 trillion a year with some $580 billion in cash - 1 percent of the world economy - available for money laundering. Just 0.2 percent of the illegal money is currently being intercepted.

The UN points to offshore banking centres in Europe - mostly Luxembourg, Switzerland and the UK - as a favoured destination for cocaine-related laundering. The region is said to legitimise around $7 billion of cocaine income a year, second only to the US on $10 billion.

Italy: Euro crisis meeting could strain coalition

Italian leader Silvio Berlusconi's coalition government is to face a major test at 6pm local time on Monday, when ministers meet to push through austerity measures under pressure from fellow EU leaders.

ECB returns to markets to help Italy and Spain

The European Central Bank has decided buy bonds from troubled eurozone countries after a five-month pause in a bid to stem the crisis from spilling to Italy and Spain.

Feature

The changing face of Europe's mafia

The landscape of European organised crime is “completely changing”, says the director of Europe's leading research institute into organised crime groups.

LuxLeaks forces discussion on EU-wide protections

LuxLeak whistleblower Antoine Deltour is urging justice ministers to help put in place rules to protect people across Europe who leak confidential information for the public good.

News in Brief

  1. Scottish MPs give go ahead to seek referendum
  2. Uber pulls out of Denmark over new taxi-regulation
  3. EU court validates sanctions on Russia's Rosneft
  4. Luxembourg to team up with Ireland in Apple tax appeal
  5. EU majority against GM crops, but not enough to block them
  6. Turkish referendum voting starts in Europe
  7. Le Pen says she lacks election funds
  8. UN dinner for Cyprus leaders to restart stalled peace talks

Stakeholders' Highlights

  1. The Idealist QuarterlyCan Progressive Stories Survive Our Post-Truth Era? After-Work Discussion on 6 April
  2. ACCAG20 Citizens Want 'Big Picture' Tax Policymaking, According to Global Survey
  3. Belgrade Security ForumCall for Papers: European Union as a Global Crisis Manager - Deadline 30 April
  4. European Gaming & Betting Association60 Years Rome Treaty – 60 Years Building an Internal Market
  5. Malta EU 2017New EU Rules to Prevent Terrorism and Give More Rights to Victims Approved
  6. European Jewish Congress"Extremists Still Have Ability and Motivation to Murder in Europe" Says EJC President
  7. European Gaming & Betting AssociationAudiovisual Media Services Directive to Exclude Minors from Gambling Ads
  8. ILGA-EuropeTime for a Reality Check on International Day for the Elimination of Racial Discrimination
  9. UNICEFHuman Cost to Refugee and Migrant Children Mounts Up One Year After EU-Turkey Deal
  10. Malta EU 2017Council Adopts New Rules to Improve Safety of Medical Devices
  11. Nordic Council of MinistersNordic Energy Research: How to Reach 100 Percent Renewable Energy
  12. Party of European SocialistsWe Must Renew Europe for All Europeans