Corruption affects all 28 member countries of the European Union and costs their economies about $162.19bn (120bn euros) a year, according to a European Union report.

The report, the EU's first on corruption, was issued on Monday by Cecilia Malmstrom, EU Commissioner for Home Affairs, the AP news agency reported.

Malmstrom said in a statement that "corruption undermines citizens' confidence in democratic institutions and the result of law, it hurts the European economy and deprives states of much-needed tax revenue.

Member states have done a lot in recent years to fight corruption, but today's report shows that it is far from enough Cecilia Malmstrom, EU Commissioner for Home Affairs

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

The report said that an increasing number of EU citizens, who were surveyed as part of the report, thought it was getting worse.

Almost all companies in Greece, Spain and Italy believe it is widespread and, among businesses, belief is widespread that the only way to succeed is through political connections.

Corruption is considered rare in Denmark, Finland and Sweden, according to the report, a finding that reflects the work of Transparency International's corruption perception index.

It named Greece as the worst performer in the EU, sharing 80th place with China. Denmark was seen as the least corrupt.

Construction companies, which often tender for government contracts, are the most affected. Almost eight in ten of those asked complained about corruption.

Overall, 43 percent of companies see corruption as a problem. The cost to the European economy is almost equivalent to the size of the Romanian economy.

Eight out of ten EU citizens believe that close links between business and politics lead to corruption.

"Europe's problem is not so much with small bribes on the whole," Carl Dolan of Transparency International in Brussels, told Reuters. "It's with the ties between the political class and industry."

"There has been a failure to regulate politicians' conflicts of interest in dealing with business," he said.

"The rewards for favouring companies, in allocating contracts or making changes to legislation, are positions in the private sector when they have left office rather than a bribe."

The European Commission recommended better controls and a redoubling of enforcement.

The report was published shortly after Romania's former prime minister, Adrian Nastase, was sent to jail for four years for taking bribes.

He was the first prime minister to be put behind bars since the collapse of communism in Europe in 1989.

The EU has repeatedly raised concerns about a failure to tackle corruption at high-level in Romania and Bulgaria, the bloc's two poorest members.

They have been blocked from joining the passport-free Schengen zone over the issue since their entry.

In October 2012, former European Health Commissioner John Dalli was forced to quit after an associate was accused of asking for 60 million euros from a tobacco company in return for influencing EU tobacco law.