'Black economy' could give boost to struggling EU

Europe's governments are turning their attention to prostitution, drugs and contraband as possible ways of boosting their economic growth profiles, as they struggle to put their debt crises behind them.

Italy caused a stir when it announced last month that it would begin including revenues from drug trafficking and the sex trade, as well as contraband tobacco and alcohol in calculating gross domestic product starting next year.

One effect would be to reduce the public deficit as a ratio of output, if EU authorities accepted the idea. That would be a big help to countries trying to get their public deficits below the EU ceiling of 3 percent of output.

In 2012, Italy's central bank estimated the value of the criminal economy at 10.9 percent of GDP. Including these figures could therefore boost the country's growth to above the government's 1.3 percent estimate.

Last month, Britain said including illegal activities such as prostitution and drugs in national accounts would add about 10 billion pounds ($16.8 billion) to GDP, equivalent to about 1 percent of national output.

Using the undeclared or so-called black economy to calculate national statistics is part of a range of changes recommended by the European Union's statistical institute, Eurostat, to be implemented in September.

Eurostat said including such data would allow a better comparison between countries with different laws.

"GDP is not an indicator of morality," said a spokesman, adding that only transactions carried out consensually would be included.

But others are less convinced.

Eric Vernier, a researcher at the Institute of International Relations, said including "gross criminal product" in growth figures is a cynical attempt to combat the eurozone's debt crisis.

"The problem is to put this new statistical method on the table at the moment when everyone has budget problems," he said.

"There has been a general acceptance of this accounting approach since the crisis: What matters most is what goes into the state coffers."

Many of Europe's struggling governments will welcome any boost to growth figures that will reassure both disillusioned voters and markets.

But the decision has sparked outrage among politicians and rights groups.

France's Minister for Women's Rights Najat Vallaud-Belkacem and Belgium's Interior Minister Joelle Milquet have both written to the European Commission to express their "astonishment" over the proposals.

"Prostitution is not a voluntary commercial activity. To believe that it can have an ideological bias is a mirage and an insult to the millions of victims of sexual exploitation worldwide," they said.