Surface observations show puzzling evidence of reduced solar warming and concurrent increasing temperature during the last four decades. Based on climate simulations with the general circulation model of the Max Planck Institute in Hamburg we suggest that the interactions of greenhouse gas forcing plus direct, semi-direct and indirect aerosol effects on clouds explain this paradox. We argue that reductions in surface solar radiation due to clouds and aerosols are only partly offset by enhanced down-welling longwave radiation from the warmer and moister atmosphere. We conclude that the radiative imbalance at the surface leads to weaker latent and sensible heat fluxes and hence to reductions in evaporation and precipitation despite global warming.