Transcript Slide 1

G7 & Debt Dynamics
John Chambers
Managing Director & Chairman, Sovereign Rating Committee
Standard & Poor's
National Association for Business Economists
January 28, 2010
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Copyright (c) 2008 Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved.
Comparative Default Rates
Basel II Cumulative Default Rate Benchmark Comparison with
Sovereign Foreign Currency Default Rates
AAA
AA
A
BBB
BB
B
Basel II Benchmarks
10-year average of 3-year CDRs
10-year average of 3-year CDRs
2000-2009
Long Run Reference
0.00
0.01
0.00
0.01
0.00
0.03
1.39
1.00
4.57
7.50
6.71
20.00
*Last year in the static pool.
** Calculated using 10, three-year cohorts beginnng Jan, 2000 and ending Dec, 2009.
CDR - Cumulative default rates.
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2.
Five-Year Transition Rates
Sovereign Foreign Currency Average Five-Year Transition Rates
1975-2009*
Rating five years later (%)
Ratings as of
# of
January 1
counts
AAA
356
AA
208
A
169
BBB
161
BB
183
B
131
CCC/CC
14
AAA
89.04
19.23
0.00
0.00
0.00
0.00
0.00
AA
9.83
74.52
15.98
0.00
0.00
0.00
0.00
A
0.00
4.81
67.46
39.13
2.19
0.76
0.00
BBB
0.00
0.96
14.79
46.58
20.22
6.87
0.00
BB
1.12
0.48
1.18
7.45
60.11
22.90
7.14
B
0.00
0.00
0.59
1.86
9.29
48.85
14.29
*Implied Senior debt rating though 1995, sovereign credit ratings thereafter.
Source: http://creditpro.standardandpoors.com
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3.
CCC/CC
0.00
0.00
0.00
0.62
0.55
5.34
7.14
SD
0.00
0.00
0.00
4.35
7.65
13.74
71.43
NR
0.00
0.00
0.00
0.00
0.00
1.53
0.00
G-7 Rating Movement
Rating
USA
AAA/Stable
UK
AAA/Negative
France
AAA/Stable
Germany AAA/Stable
Italy
A+/Stable
Canada
AAA/Stable
Japan
AA/Negative
2005 2006 2007 2008 2009 2010
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4.
Net General Government Debt: 2005, 2009
120%
100%
80%
60%
40%
20%
0%
Italy
Japan
Germany
2005
France
U.K.
2009
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5.
U.S.
Canada
Labor Costs
2008 vs 2000 change in Unit Labor Costs (in National
Currencies, subsidy adjusted, US Bureau of Labor Statistics,
Eurostat data)
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
Japan
Germany
United
States
UK
France
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6.
Canada
Italy
Forecast of Real GDP Growth Rates (%)
5
4
Germany
3
2
France
1
Italy
0
-1
2008
2009
2010e
2011f
2012f
UK
-2
USA
-3
Japan
-4
Canada
-5
-6
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7.
General Government Budget Balance: 2008-2012f
Germ any
France
Italy
U.K.
U.S.
Japan
Canada
4
2
0
-2
-4
-6
-8
-10
-12
-14
2008
2009
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8.
2012f
Base case cost of financial sector recapitalization, 2009
Base recapitalisation costs (% GDP)
12
10
10
8
5.5
6
4
1.7
2
0.7
0.5
0
0
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9.
an
ad
a
C
Ja
pa
n
Fr
an
ce
er
m
Ita
ly
an
y
K
U
G
U
SA
0
Net General Government Debt: 2009-2012f
120%
105%
90%
75%
60%
45%
30%
15%
Italy
Japan
Germany
2009
France
2010e
U.K.
2012f
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10.
U.S.
Canada