Without corruption, there would be no public debt

Corruption: the macroeconomic variable that has been overlooked and which invalidates economic and political theory and analysis. “Without corruption, there would be no public debt”

Thirty years have just passed since the adoption of the first international anti-corruption instrument. Since then, several intergovernmental organisations have produced a multitude of anti-corruption rules and documents stating that corruption affects the functioning of the market economy and generates systemic economic and social distortions that extend far beyond the direct loss of public resources.

However, this institutional recognition has not been incorporated into economic and political theory and analysis, giving rise to a profound distortion.

This article brings together the main official estimates of corruption and relates them to the public debt of the European Union’s largest economies in order to explore some of their macroeconomic implications.

Official estimates

The first estimate with global coverage appeared in 2008. Transparency International, the World Chambers Federation, the World Economic Forum’s Partnering Against Corruption Initiative (PACI), and the United Nations Global Compact jointly estimated that corruption amounted to approximately 5% of global GDP. That figure placed corruption, for the first time, as a problem of macroeconomic magnitude and also reflected an unusual consensus between international organisations and the business community.

In 2014, the European Commission published an estimate close to 1% of the European Union’s GDP, one fifth of the previous global estimate. In 2018, a report by the European Parliament estimated corruption in the European Union’s member states at 4.8% of their GDP. Two days later, the United Nations published that corruption accounted for 5% of global GDP, two tenths of a percentage point more than in the European Union, due to the latter’s engineering.

The figures differ because they respond to different methodologies and objectives. However, they all coincide on one essential point: corruption is not a marginal phenomenon, but a reality with a clearly macroeconomic dimension.

What does this imply for Europe’s largest economies?

Official estimates acquire a different dimension when they are transferred from the aggregate level to the analysis of national public finances.

The 2018 European assessment did not merely provide an aggregate figure for the European Union. It also published national estimates for each member state. Among the Union’s four largest economies, these figures amounted to 4% of GDP in Germany, 6% in France, 8% in Spain and 13% in Italy.

Between 2010 and 2019, so as not to include the distorted year of 2020, the trajectory of public debt would have been substantially different in the four economies if these corruption figures were subtracted:

In Germany, public debt would have fallen from 58.7% to 18.7% of GDP.
France: from 98.2% to 38.2%.
Italy: from 133.9% to 3.9%.
Spain: from 97.7% to 17.7%.

These last three countries not only failed to reduce their debt, but experienced the largest increase this century.

Even after incorporating the sharp increase in indebtedness caused by the political response to the pandemic from 2020 onwards, the trajectories would still remain well below current levels. In general, there would have been a cumulative fiscal surplus instead of debt, potentially leading to a substantial reduction in taxes. In other words, corruption not only harms today’s economy but also the future, causing current generations to live worse than their parents.

A much larger macroeconomic dimension

The most significant update of the estimates came in 2023. The United Nations estimated that approximately 25% of global public expenditure is lost as a consequence of corruption. This change in approach is substantial because it links the size of public expenditure to corruption: the larger public expenditure is, the greater corruption becomes, and the smaller public expenditure is, the lower corruption becomes. This estimate suggests that the uncontrolled increase in public expenditure in recent years is due to corruption, that is, to the criminal enrichment of politicians and other public authorities.

In the same report, global public expenditure was estimated at around $13 trillion, while public expenditure in the European Union exceeded $8.2 trillion, approximately two thirds of global public expenditure. Public expenditure in the European Union’s member states amounted to 49.2% of GDP in 2022, so applying the 25% estimate would imply 12.3% of GDP, more than three times the 2018 European estimate.

The magnitude of these figures places the problem above the 2018 estimates for the European Union.

Official estimates are not the only evidence available. I have been able to identify only one large-scale econometric study on the macroeconomic dimension of corruption. Developed within the Eurosystem and subsequently published in the International Economic Review, the study analyses administrative data corresponding to half a million Spanish firms during the period 1995–2007.

Its conclusions are particularly relevant because they do not merely quantify an economic cost. The study shows that corruption distorts the allocation of capital and labour across firms, reduces productivity and prevents the growth of the most efficient firms. Furthermore, it estimates that firms devoted resources equivalent to 13.71% of GDP to bribing (extorting) politicians. The research was previously presented in 2015 before representatives of the European Commission, the European Central Bank and the OECD, prior to its official publication the following year.

Taken together, the official estimates and the econometric evidence point in the same direction.

Why does this matter now?

The issue is especially relevant because Europe is entering a period characterised by structurally high levels of public debt and financing costs that are likely to remain above those recorded during the previous decade.

Public debt in the European Union remains above 80% of GDP, while interest payments already absorb around 2.4% of annual GDP. All this is occurring precisely at a time when expenditure on defence, the energy transition, digital transformation and demographic ageing is increasing, placing growing pressure on taxpayers.

At the same time, international institutions themselves acknowledge that anti-corruption policies continue to display significant limitations. In 2026, the OECD not only pointed to new normative gaps—the difference between enacted rules and international standards—but also identified and quantified a compliance gap: the failure of public officials, including politicians, to enforce those rules themselves.

This diagnosis is particularly significant in the European Union. After almost three years of negotiations, and published the day after the United Nations made public that corruption accounts for 25% of public expenditure, the new Anti-Corruption Directive was adopted. The CEO of Transparency International published an unusual criticism on LinkedIn: “EU member states didn’t just fail to be ambitious, in many cases they actively weakened the text.”

According to the documentation of the international organisations themselves, corruption harms the economy and people’s way of life in many more ways, as will be described in subsequent articles.

Known corruption cases are useful for distorting the true consequences of corruption.

Why do universities, the media (especially the economic media), and economists themselves continue to maintain theories and analyses that do not include corruption as a macroeconomic variable and as a factor in political decision-making?