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German hidden economy deflates

February 6, 2013

Economic think tanks have revealed that Germany is currently seeing the lowest level of moonlighting in two decades. Researchers say the reasons for the declining hidden economy are low unemployment and other factors.

A man wallpapering a flat
Image: Fotolia/Tom Bayer

Low unemployment and a drop in statutory pension premiums resulted in shrinking shadow economy in Germany, two economic research centers reported on Wednesday.

Scientists from Linz University and the Tübingen-based Institute for Applied Economic Research (IAW) claimed moonlighting levels in the country had reached its lowest level in about 20 years.

"Right now, people have a good chance to get jobs in the regular economy, meaning their motivation to engage in illegal work is limited, and so is the time they'd have for doing that on top of regular employment," IAW Managing Director Bernhard Boockmann said in a statement.

Serious problem

Nonetheless, the pundits estimated that every seventh euro earned remained hidden from the Treasury. The think tanks which compiled the study expected untaxed earnings of 340 billion euros ($461billion) to be generated in the hidden economy in Germany in the course of this year.

That would account for 13.2 percent of gross domestic product (GDP). Back in 2003, the rate reached an all-time high at 17.1 percent of GDP.

The current figures for Germany put the country in midfield in a ranking looking at all OECD member states. Greece provides the worst example, with 24.6 percent of GDP expected to be hidden from state coffers. But even there, experts say the shadow economy looks set to shrink in the months ahead, if compared with the levels recorded in the past few years.

"Because of the protracted economic crisis in the country, private households will have less and less at their disposal to spend, meaning demand for moonlighting will decrease too," Boockmann argued.

hg/hc (dpa, AFP)