Europe

Luxembourg Foots a Big Piece of the Greek Tab


The bailout of Greece is costing the 16 countries in the euro zone some $100 billion. Germany, the area's biggest economy, will pay almost 30 percent of the total, much to the dismay of many of its taxpayers.

A look at the contributions per capita, however, yields a different picture. The tiny Grand Duchy of Luxembourg will offer emergency loans worth 417.54 euros ($517.79) a person to bail out Greece, the biggest per capita contribution to the package. The second-biggest giver is Ireland, at $369 per capita—even though Ireland's economy is just shedding its basket-case status. Germany comes in sixth at $335 per capita.

The contributions to the rescue fund are based on the capital levels that each country holds in the European Central Bank. Luxembourg and Ireland have fairly substantial amounts of capital parked with the ECB, so they have to chip in heavily to the rescue.

These skewed numbers could add to the simmering resentments inside the euro zone. "Popular discontent might soon become broad as voters realize that as individuals they are contributing more than the average German," says Marco Annunziata, chief economist at UniCredit in London.

A quick test of this thesis in the streets of Dublin and Luxembourg produce some surprising results. The Irish, already subjected to draconian austerity measures by the Dublin government, seem more resigned to helping the profligate Greeks. "I think it's probably a consequence of being in Europe—we got all the benefits in the past, now we have to pay," says Liam Thompson, 45, an accountant. "It's a necessary evil."

In contrast, some citizens of the fairy-tale-like Luxembourg, the wealthiest economy in Europe after Lichtenstein, are plenty angry. "We have to bleed for the others only because Luxembourg is among the richest countries," says Sacha Ludovicy, 29, a civil servant in Luxembourg. Adds bus driver Tom Paternoster, 31: "It makes you wonder whether the whole Europe thing is good. We may just as well build a wall around ourselves."

The bottom line: Discontent over the cost of the Greek bailout is spreading beyond Germany. European solidarity will be tested if the bill rises.

Donovan is a reporter for Bloomberg News.
Fahy is a reporter for Bloomberg News.
Bodoni is a reporter for Bloomberg News in Luxembourg.

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