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Corruption costs EU economy $162 billion a year

One in 12 Europeans have experienced or witnessed a case of corruption in the past 12 months, according to a new report published on Monday which claims corruption costs the EU economy 120 billion euros ($162 billion) per year.

The first ever European Union Anti-Corruption Report revealed the concerns of citizens and businesses in the 28-nation bloc over corruption.

Over three quarters of Europeans think that corruption is widespread in their own country, while 56 percent think the level of corruption has increased over the past three years.

(Read more: Study details rampant government corruption worldwide)

Sami Suni| E+ | Getty Images

The perception across member states is mixed with countries such as Greece, Romania, and Italy among the top places where respondents are most likely to think corruption is prevalent. Citizens in Denmark, Sweden and Finland think corruption is rare.

"Corruption undermines citizens' confidence in democratic institutions and the rule of law, it hurts the European economy and deprives states from much-needed tax revenue," Cecilia Malmström, European Union's (EU) commissioner for home affairs, said in a press release.

"Member States have done a lot in recent years to fight corruption, but today's report shows that it is far from enough."

Three in four companies say that corruption is a problem in their country, with nepotism and tax fraud amongst the biggest corrupt practices highlighted.

While some EU countries have taken steps to combat corruption, the report says no strategy is in place in others.

(Read more: Corruption worsens amid deep distrust of government)

Public procurement, which accounts for approximately a fifth of the EU's GDP, is an area the report says is "vulnerable to corruption".

Just how dodgy is your country?

Criticism of report

The EU has faced a litany of criticisms over the report, particularly the fact that it does not propose or introduce any new laws or sanctions.

Commissioner Malmström was forced to defend the integrity of the report at a press conference after its publication.

(Read more: Half of all employees think corruption is OK: Report)

"It's the first time in the history of the European Union that we have a summary record of the situation in the EU. In all 28 countries of the EU corruption is present. This (report) could be very useful for our discussion," she said.

EU institutions such as the Commission, the bloc's executive arm, were left out of the report too, despite concerns about corruption. Malmström said that the institutions are in discussion to sign up to Greco, the body that monitors member states' compliance with anti-corruption rules.

—By CNBC's Arjun Kharpal: Follow him on Twitter @ArjunKharpal