In Europe, there is a small, invisible state, the Giugliano region, located just north of Naples, which has neither government, nor borders, nor banks – yet it prints euros. Counterfeit ones, naturally, but these are so faithfully rendered that they are raising fears at the European Central Bank (ECB) and among international police forces.

The highest concentration of counterfeiters and clandestine printers in all of Europe can be found within a twenty kilometre radius around Giugliano. Over half of the counterfeit bills in circulation in the seventeen-country Eurozone are produced there, on lands ravaged by illegal construction and smothered by mafia clans.

Since 2002 and the introduction of the euro, 5.5 million counterfeit bills, with a face-value of nearly 400 million euros, have been taken out of circulation in Europe. This might seem anecdotal given the 14 billion genuine bank notes currently in circulation. "But the amounts seized are only the tip of the iceberg," explains a Europol source, "and the part that slips through the net is significantly larger," by three or four times, according to some estimations.

"The largest orders are for North America, Colombia and the Middle East," the source explains. But more than the quantity, it's the quality of the counterfeit bills produced by the Giugliano counterfeiters that is the most serious threat to the single currency.

Typesetters capable of imitating the security features on the various bills can be counted on the fingers of both hands. For organized crime, these counterfeiters are worth gold. Once they get their hooks into one, they don't let go. They monitor his slightest movements, even in jail. La Camorra tolerates this type of activity which is used only in exchange for large quantities of Columbian cocaine.

France and Spain are right behind Italy

Three people and a strict division of labour are needed to set up a team of counterfeiters. The first link is the owner of the printing plant who is also the senior partner. Usually a low-level cog of the Camorra, he will supply the used offset printer (a recent colour printer model costs up to 500, 000 euros), the filigree watermark paper, the ink and all the materials need. Then comes the typesetter charged with the actual production. Finally the distributor, a confident of the senior partner, responsible for stocking the bills, as far from the printing plant as possible, and to liaise with the clients.

The bills follow the same distribution path as do drugs. At the wholesale level, the bills are sold by the distributor at 10% of the face-value. The wholesaler sells to intermediaries, petty local criminals or international carriers (often Estonian or Lithuanian) who carry suitcases full of fake bills to Spain, Belgium or Lithuania. Or they sell to illegal immigrants who hope to make a small profit by bartering a few bills at Rome or Naples’ main train stations.

Although half of the European production is ensured by gangsters from Giugliano, the Italians are facing stiff competition from the Bulgarians. In the countryside south of the capital, Sofia, where imitating dollars is an ancient tradition, they are now capable of fabricating a yellow 200 euro bill of excellent quality. In the Varna industrial zone, on the shores of the Black Sea, Europol and North American secret services discovered, in January 2004, one of the first printing plants in the world capable of reproducing the 200 euro bill, put into circulation only two years earlier. Eight years after that, the production centres have shifted to the south of country, to Plovdiv and Haskovo.

France and Spain are right behind Italy in the production of counterfeit currency. But in those countries, the counterfeiters use state-of-the-art laser printers, a technology that has opened the counterfeit bank note market to computer experts and to graphic artists mastering the most sophisticated software.

And what of the Chinese?

Emerging nations must also be reckoned with, such as Poland, where, a few weeks ago in Warsaw, a million euros were seized. The money was supposed to be used to scam spectators of the next European Football Championships jointly hosted by Poland and the Ukraine. Bosnia also has a thriving counterfeit industry. Turkey, Romania, and Albania do not produce counterfeit bills, but their carriers shuttle back and forth between Sofia and Naples to stock up. The most efficient retailers of false bills are the Lithuanians who had the bright idea of spreading the bills throughout the land using their well-honed network of drug dealers.

According to Tzvetan Tzvetanov, the Bulgarian Interior Minister, "counterfeiting is becoming a concern for the security of the euro because counterfeit bills are flooding the market. What's more the penalties are not sufficiently severe against counterfeiters". Meanwhile in Frankfurt, the leaders of the ECB display peace of mind. The volume of counterfeit money seized in 2011 is lower by 19.3% than in 2010 and the 606,000 bills taken out of circulation (of which 215,000 in Italy) represent a face value of about 10 million euros out of a total 14.4 billion euros worth of genuine bills. This represents a low rate of counterfeits, on the order of 0.0004%.

The paths that take the counterfeit bills out of Europe towards the rest of the world go through Spain and point towards those countries with weak currencies and an approximate knowledge of the euro; the Mid-East, North Africa, Eastern Europe for the most part. In Africa some banks cannot tell the real euros from the fakes and exchange them for local currency. And what of the Chinese? These masters of counterfeiting have, for the moment, stayed on the sidelines. But recently, says a Europol source, it was discovered that the holograms used by the Bulgarians for the 200 euro bills were made by Chinese counterfeiters. If they too start to print, the problem could take on a whole new dimension.