Social Unrest Can Shake Investor Confidence
And Contagion Can Spread
10-Year Sovereign Yield Spread (over German Bonds) for Greece / Portugal / Spain / lreland, April 1 -— May 10, 2010
10%
xs 5/6 — Greek parliament
o formally approves austerity ——>
& 8% package agreed w/ EU & IMF ——Greece aS
E 4/22 — Greek civil servants
© stage a 24-hour strike
g 6% —Portugal 4 |
3 - -
o 5/5 — Violent protests in
5
Fy 4% Athens against proposed —spain 3S 9 austerity measures
2
2
=]
7)
s 2% = Ireland =
—
©
a
> Oe
4
0% i} T T T T T T T T T T T T 4/1 4/4 477 «©4110 413 4/16 4/19 4/22 4/25 4/28 5/1 5/4 5/7 p Source: FactSet.
i USA Inc. | Consequences of Inaction 429
Government Deficits and Changes in Sovereign Credit Default Swap Rates
= Positively Correlated
Cumulative Government Deficits as % of GDP vs. Change in Sovereign CDS between 2007 and 2011E
B00 -— nn nn nt ® Greece N = = 500 --------- ~~ === 5-582 nn ooo oo ooo aaa oan aa ao fo2) i=] oS N ra 400 © ie) a BBY a a ee eee cee ami ene © een one Smo Se a go Portugal . g¢ R? = 0.1996 ir] S 2 BDI =< oon sewer eeee fale. 232 es re
a pem o= Ye = 5 e Ireland o - rm TOD) = sre cs ee 5 =e Frante~=—S—CS ee a Germany —®- ~~ Japan e UK —_ £ Py ——”~ @e Netherlands USA 5 0% 10% 20% 30% 40% 50% 60% = o 100 ---- ~~~ ~~ 5 oo nn nn nn an aaa a a a Cumulative Government Deficits as % of GDP for 2007-2011 (10-11 Projections) K p Sources: OECD; Markit; National Data a USA Inc. | Consequences of Inaction 430
HOUSE_OVERSIGHT_021056