ZEW President Fuest Calls for Politicians to Make Costs of Greek Bailout Package Transparent to Taxpayers

In guest commentary for the German newspaper "Frankfurter Allgemeine Zeitung" published this morning, the president of the Centre for European Economic Research (ZEW), Professor Clemens Fuest, urged that the costs of the new bailout package for Greece would have to be made transparent for German taxpayers. Unlike in the previous aid programmes, the vote on the new bailout package for Greece, taken in the German parliament, will not be a matter of loans, says Fuest, but rather of transfers - i. e. money that will not be returned. The programme therefore marks a fundamental turning point in the eurozone - the venture into the transfer union.

In view of this profound change, Fuest argues that voters and taxpayers in Europe need to be informed about the transfer character of the new payments to Greece and that they will put further pressure on national budgets in the eurozone.

What is the scale of the financial support? The total aid volume for the coming three years, which is being discussed at the moment, will range between EUR 82 and 86 billion. The International Monetary Fund (IMF) will not absorb any losses. If Germany contributes to covering these costs in accordance with its 26.9616 per cent share in the bailout fund of the European Stabilisation Mechanism (ESM), it would have to pay EUR 22.1 to 23.1 billion over the next three years. Sooner or later, Germany will have to introduce higher taxes or spending cuts to bear the costs of the programme.

One way to finance the programme is to increase the solidarity surcharge from 5.5 to eight per cent. According to the official tax estimates published in May 2015, the solidarity surcharge will amount to EUR 50.7 billion between 2016 and 2018. Raising the surcharge to eight per cent at an unchanged tax base would mean additional tax revenues of EUR 23 billion.

With regard to the financing of the Greek recovery package, Fuest explains: "I do not support the current bailout plans for Greece, but if policy makers adopt them they also need to decide on ways of financing the transfers to ensure that the voters and taxpayers are made aware of the programme's costs."

For further information please contact

Professor Clemens Fuest, Phone +49(0)621/1235-100, E-mail fuest@zew.de