OBJECTIVE: Care for demented people is very resource demanding, the prevalence is increasing and there is so far no cure. Cost of illness (CoI) studies are important by identifying the distribution of costs between different payers of care. The European Union (EU) funded the European Collaboration on Dementia (Eurocode) as part of the EU's 2005 work plan of the Community public health programme. Eurocode was administered by Alzheimer Europe. The aim was to describe the economic impact of dementia in Europe in 2008. METHODS: Eurocode's new estimates for dementia prevalence were included in a cost model based on published European CoI papers. For countries where no CoI figures were available, imputation was used. RESULTS: The total CoI of dementia in the EU27 in 2008 was estimated to be €160 billion (€22 000 per demented per year), of which 56% were costs of informal care. The corresponding costs for the whole Europe was €177 billion. In northern Europe, the direct costs are estimated to be considerabe, while the cost of informal care is the major cost component in southern Europe. The sensitivity analysis showed a range for total EU27 costs between €111 and 168 billion. CONCLUSIONS: The estimated CoI in this study is higher than in previous studies. There are also large differences in different European regions. Notwithstanding the methodological challenges, the societal costs of dementia in Europe are very high which in turn have substantial resource impacts on the social and health care systems in Europe.