Illicit EU cigarette consumption at record high

Of those, more than 12 billion were consumed in Spain, Italy, Greece, Portugal, Cyprus and Malta. Western and central EU countries consumed a combined total of 36.5 billion.

But in Spain alone, cigarette contraband jumped by 300 percent in 2011 compared to 2010. In Greece, illicit consumption increased five-fold compared to 2008.

"Despite efforts by law enforcement authorities to curb the illegal cigarette market, it remains a significant problem, having grown by more than five billion cigarettes in the EU in the last five years," said PMI’s Artyom Chernis, vice-president of illicit trade strategies and prevention.

The production of cigarettes that are manufactured and then smuggled into another EU country went from nearly zero in 2006 to 15.7 billion last year, or nearly one in every four smoked.

The smuggled cigarettes are considered a recent phenomenon on the European black market. Many are sold throughout EU capitals at a 50 to 70 percent mark down compared to the store-bought equivalent.

The study, conducted by the US-based auditing firm KPMG, says the contraband represents an €11.3 billion annual loss in EU-wide tax revenue.

Last April, authorities in Rome along with the EU's anti-fraud office, Olaf, dismantled a major criminal international smuggling organisation that branched out to Spain, Germany, Slovenia, Greece and Bosnia.

Police seized 10 tonnes of cigarettes valued at approximately €2 million. One of the men arrested had close ties to the Camorra organised crime group in Naples. He was living as a fugitive in Greece at the time of his arrest.

For its part, the European Commission has partnered up with four of the world's largest tobacco manufacturers in order to tackle the problem.

The commission ranks cigarettes as the number one product detained by EU border customs in 2010. Nearly 34 percent of all illicit articles entering the EU were cigarettes.