World real GDP growth in 2010 Annual percent change

World real GDP growth in 2010 Annual percent change 1 or more 6-1 3-6% 0-3% Less than No data Source: International Monetary Fund.

World real GDP growth in 2011 Annual percent change 1 or more 6-1 3-6% 0-3% Less than No data Source: International Monetary Fund.

Solid recovery World real GDP grew by 5 percent in 2010 Real GDP growth, percent 10 8 6 4 2 0-2 -4 Emerging and developing economies Advanced economies World -6 1980 1985 1990 1995 2000 2005 2010 2015 Source: World Economic Outlook, International Monetary Fund, April 2011 update.

World output forecasts Percent change from previous year 2010 2011F 2012F World 5.0 4.4 4.5 Advanced economies 3.0 2.4 2.6 United States 2.8 2.8 2.9 Japan 3.9 1.4 2.1 United Kingdom 1.3 1.7 2.3 Euro area 1.7 1.6 1.8 Emerging and developing economies 7.3 6.5 6.5 Brazil 7.5 4.5 4.1 China 10.3 9.6 9.5 India 10.4 8.2 7.8 Russia 4.0 4.8 4.5 South Africa 2.8 3.5 3.8 Source: World Economic Outlook, International Monetary Fund, April 2011.

Inflation risk ahead? Percent change of consumer prices (year-to-year) Percent 10 9 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: World Economic Outlook, International Monetary Fund, April 2010 update. Emerging and developing economies Advanced economies World

Interest rates for advanced economies Target interest rates of central banks Policy interest rates, percent 6 5 United Kingdom 4 3 2 Eurozone April 6, 2011: The European Central Bank raised its main interest rate for the first time since July 2008 1 United States 0 2008 2009 2010 2011 Source: Bloomberg.

Consumer confidence index: Eurozone Consumer confidence index 5 0-5 -10-15 -20-25 -30-35 -40 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Sources: Eurostat, Bloomberg.

Business climate indicator: Eurozone Business climate indicator 2 1 0-1 -2-3 -4-5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Sources: Eurostat, Bloomberg.

Unemployment in the Eurozone remains high Unemployment rate, percent (seasonally adjusted) 10.5 10.0 9.5 9.0 8.5 8.0 7.5 7.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Sources: Eurostat, Bloomberg.

Labor productivity in eurozone Index, 2005=100 110 105 100 95 90 85 80 75 70 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: OECD.

Government debt-to-gdp ratio at historic high 1992 to 2012 (Projections after 2009) Gross debt, percent of GDP 110 100 90 Euro area 80 70 60 50 Total OECD Source: OECD. 40 1992 1995 1998 2001 2004 2007 2010

Fiscal deficit for selected Eurozone countries Government surplus/deficit as percent of GDP 5.0 0.0-5.0-10.0-15.0-20.0-25.0-30.0 Source: OECD.

Greek and Portuguese yield spreads trend up Yield spread over 10-year German government bonds, percentage points 12 10 Greece 8 6 4 2 Portugal 0 2007 2008 2009 2010 2011 Sources: Bloomberg, Milken Institute.

Sovereign risks heightened after 2009 Credit default swap spreads, five-year government bonds Basis points 250 200 Basis points 1,200 1,000 Greece 150 100 50 0 2008 2009 2010 2011 Italy France Germany 800 600 400 200 0 2008 2009 2010 2011 Ireland Portugal Spain Source: DataStream.

Recent rating changes for selected European countries S&P's foreign currency long-term debt ratings AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- Spain Ireland Portugal Iceland Greece 2006 2007 2008 2009 2010 2011 Sources: Bloomberg, Milken Institute.

Sovereign ratings for Greece and Portugal S&P s foreign currency long-term debt ratings A+ A A- BBB+ BBB BB+ BB Greece AA A+ A A- BBB+ BBB BB+ BB AA- BBB- BB- AA- BBB- BB- Portugal 1996 2001 2006 2011 Sources: Bloomberg, Milken Institute. 1996 2001 2006 2011

Government capital investments in financial firms Most recently available data, as of April 6, 2011 (US$ billions) Total outstanding = $491 billion Belgium, $18 Netherlands, $23 Rest of the world, $20 Ireland, $31 Germany, $68 United States, $232 United Kingdom, $99 Source: Bloomberg.

Are the biggest banks in the world too big to fail? Trillion-dollar banks, ranked by assets, 2010 Bank Country Total Assets (US$ trillions) Market Cap (US$ billions) 1 BNP Paribas France 2.7 92 2 Deutsche Bank Germany 2.5 56 3 HSBC Holdings U.K. 2.5 192 4 Barclays U.K. 2.3 59 5 Royal Bank of U.K. 2.3 77 Scotland 6 Bank of America U.S. 2.3 138 7 Mitsubishi UFJ Japan 2.2 62 8 Credit Agricole France 2.1 40 9 JPMorgan Chase U.S. 2.1 188 10 ICBC China 2.0 258 11 Citigroup U.S. 1.9 131 12 Mizuho Financial Japan 1.7 33 Bank Country Total Assets (US$ trillions) Market Cap (US$ billions) 13 China Construction China 1.6 240 Bank 14 Banco Santander Spain 1.6 102 15 Bank of China China 1.6 150 16 Agricultural Bank China 1.6 146 of China 17 Lloyds Banking U.K. 1.5 69 18 Societe Generale France 1.5 50 19 UBS Switzerland 1.4 71 20 Sumitomo Mitsui Japan 1.3 41 21 Wells Fargo U.S. 1.3 169 22 Credit Suisse Switzerland 1.1 52 23 Commerzbank Germany 1.0 11 Sources: Bloomberg, Milken Institute. Note: Market capitalization is from April 6, 2011.

Leverage ratios are higher in advanced economies Household debt-to-gdp ratios, percent 140 120 100 80 60 40 20 0 Source: International Monetary Fund.

Debt-to-GDP ratios in selected countries Debt as % of GDP, 2009 1,200 1,000 800 Financial institutions Corporates Households Government 600 400 200 0 Source: International Monetary Fund.

Creditless recovery in Europe? Lending to non-financial corporations Lending to non-financial corporations, billions of euros 200 150 100 50 0-50 -100 2004 2005 2006 2007 2008 2009 2010 Source: European Central Bank

European corporate bond issuance US$ billions 800 700 600 500 400 300 200 100 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: International Monetary Fund.

Norway Switzerland Brazil Euro area Canada Turkey Australia United States Japan Argentina Britain Hungary Singapore South Korea Poland Indonesia Mexico South Africa Taiwan Russia Philippines Malaysia Thailand China Hong Kong Big Mac Index: Euro overvalued? 10 8 6 4 2-2 -4-6 Source: The Economist.

Declining role of U.S. dollar and rising role of euro International debt outstanding by currency Pound sterling 7.5% 2000: Total US$6 trillon Yen 7.5% Other 1.7% U.S. dollar 50.6% Pound sterling 7.7% 2010: Total US$26.8 trillion Yen 2.8% Others 6.1% Euro 44.1% Euro 29.5% U.S. dollar 39.2% Source: Bank of International Settlements.

World age structure, 2005 Percentage of population younger than 30 years old Source: National Intelligence Council. 60 or more 45 to 59 30 to 44 Less than 30 No data

World age structure, projected 2025 Percentage of population younger than 30 years old Source: National Intelligence Council. 60 or more 45 to 59 30 to 44 Less than 30 No data

Eurozone s rising old-age dependency ratio Projection, 2010 to 2060 Percent 60 50 40 30 20 10 0 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 Sources: Eurostat, Milken Institute. Note: Old-age dependency ratio is calculated as the number of people 65 and older divided by the number of persons aged 15 to 64.

Valerio De Molli slides

Europe 2020: EU headline targets The Commission adopted the following 5 EU headline targets: 1. 75% of the population aged 20-64 should be employed 2. 3% of the EU's GDP should be invested in R&D 3. The "20/20/20" climate/energy targets should be met (Greenhouse gas emissions must be reduced by at least 2 compared to 1990 levels or by 3 if the conditions are right; the share of final energy consumption coming from renewable energy sources must increase to 2; energy efficiency should rise by 2) 4. The share of early school leavers should be under 1 and at least 4 of the younger generation should have a tertiary degree 5. 20 million less people should be at risk of poverty (25% reduction)

Overall speedometers 3 Overall Speedometers PAST SPEED SPEED REQUIRED DEGREE OF CHALLENGE Calculated as the weighted sum of the 7 KPIs scores AREA Key Performance Indicator (KPI) Weight EMPLOYMENT Employment rate 2 INNOVATION Gross domestic expenditure on R&D (GERD) 2 ENERGY AND ENVIRONMENT EDUCATION * Greenhouse gas emissions 1 Share of renewables in final energy consumption 1 Early leavers from education and training 1 Tertiary educational attainment 1 SOCIAL INCLUSION Persons at risk of poverty after social transfers 2 Source: The European House-Ambrosetti, 2011 (*) Energy efficiency national targets not yet set

PAST SPEED profile Methodology PAST SPEED measures the performance obtained in recent years by each country in those KPIs that are associated with the five headline objectives The Advisory Board chose 2005 as reference year, since in 2005 the Lisbon Strategy was re-launched and Member States re-committed themselves to the achievement of its targets Depending on the KPI, the past speed will be measured for the period 2005-2008 or 2005-2009

Portugal 7.28 Poland 5.98 Austria 5.87 Ireland 5.55 Luxembourg 5.44 Germany 5.29 Romania 5.28 Denmark 4.98 Hungary 4.93 Slovakia 4.91 EU-27 4.86 Slovenia 4.82 Italy 4.80 Estonia 4.79 Netherlands 4.76 Czech Republic 4.67 France 4.64 Belgium 4.54 Finland 4.51 Cyprus 4.46 United Kingdom 4.30 Spain 4.15 Bulgaria 4.05 Sweden 4.02 Greece 3.95 Malta 3.61 Lithuania 3.23 Latvia 2.39 PAST SPEED overall Speedometer Latvia 0 Min. Speed PAST SPEED OVERALL RANKING EU-27 Portugal Max. Speed 10 Source: The European House-Ambrosetti, 2011

Spain 7.92 Ireland 6.90 Portugal 6.27 Greece 6.18 Latvia 5.83 Hungary 5.76 EU-27 5.75 Poland 5.64 United Kingdom 5.48 Estonia 5.39 Romania 5.09 France 5.04 Lithuania 5.02 Belgium 5.00 Bulgaria 4.87 Italy 4.82 Austria 4.64 Slovenia 4.64 Netherlands 4.03 Slovakia 4.00 Malta 3.98 Czech Republic 3.67 Cyprus 3.39 Finland 3.24 Sweden 3.03 Luxembourg 2.96 Germany 2.57 Denmark 1.97 SPEED REQUIRED overall speedometer SPEED REQUIRED OVERALL RANKING Denmark 0 Min. speed EU-27 Max. speed Spain 10 Source: The European House-Ambrosetti, 2011

no target set no target set no target set no target set no target set no target set Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden UK Member States targets compared to the EU headline targets EU-27 2 EMPLOYMENT 75% -2 3% -3% 1% 1% 5% 1% 4% -7% -9% -3% -3% -3% -16% -5% -7% -4% -1% 7% GROSS EXPENDITURE ON R&D 3% of GDP 5-5 -10 25% -7% -5-83% -1 33% -33% -4-49% -5-37% -13% -78% -43% -33% -67% 33% GREENHOUSE GAS EMISSIONS -2-10 -20-3 -3-35% -5-2 -2-25% -2-8 -15% -2-75% -105% -125% -125% -12-145% -165% -155% -15-17 -185% -185% -195% -20 RENEWABLE ENERGIES 2 15 5 7 5 25% 9 15% 10 15% 55% 2 25% 145% Source: The European House-Ambrosetti, 2011-5 -35% -2-35% -35% -1-1 -35% -2-15% -45% -5-3 -25% -3-25%

Member States targets compared to the EU headline targets Austria 25% Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain no target set Sweden no target set UK no target set no target set no target set EU-27 EARLY SCHOOL LEAVERS <1 10-10 5% 3% -1 45% 1% 5% 2 5% 1% 2-55% -34% 1 1% 1 55% -13% 4 49% -5-20 -19 5 5 TERTIARY EDUCATION 4-5 -5% 18% -1 15% -2 5% 25% 5% -2-24% -34% -13% -18% 13% -33% -25% 1 6% SOCIAL INCLUSION -25% 5-5 8% -5-14% 32% -4% -31% 11% 16% -23% -27% 38% 11% -21% -66% -27% -17% -1 no target set no target set -2% -31% -61% 36% 24% -10 Source: The European House-Ambrosetti, 2011

Spain 6.88 Latvia 6.72 Greece 6.11 Lithuania 5.89 Ireland 5.68 United Kingdom 5.59 EU-27 5.44 Hungary 5.41 Bulgaria 5.41 Estonia 5.30 Belgium 5.23 France 5.20 Malta 5.18 Italy 5.01 Slovenia 4.91 Romania 4.90 Poland 4.83 Netherlands 4.64 Slovakia 4.54 Sweden 4.51 Czech Republic 4.50 Portugal 4.49 Cyprus 4.46 Austria 4.39 Finland 4.36 Luxembourg 3.76 Germany 3.64 Denmark 3.49 DEGREE of CHALLENGE overall Speedometer 0 EXPECTED DEGREE OF CHALLENGE OVERALL RANKING Denmark Poorly challenging targets EU-27 Spain Very challenging targets 10 Source: The European House-Ambrosetti, 2011

Countries with highest and lowest degree of challenge Employment Rate GERD Greenhouse Gas Emissions Renewables Early School leavers Tertiary Education Attainment At risk of poverty persons Highest Degree of Challenge Spain Hungary Greece Cyprus Latvia Spain Portugal Latvia Romania Malta United Kingdom Greece Austria Bulgaria Latvia Latvia Slovenia Ireland Portugal Malta Lithuania Lowest Degree of Challenge Germany Poland Denmark Hungary Romania Luxembourg Luxembourg Czech Republic Finland Sweden Austria Cyprus Latvia Denmark Bulgaria Germany Romania Estonia Bulgaria Denmark Luxembourg Source: The European House-Ambrosetti, 2011

Bernard Connolly slides

Scenarios for external adjustment in EMU Remember that the current account equals (more or less) the trade account plus the income account plus the transfers account Adjustment via the trade account: requires an improvement in competitiveness, which within EMU must imply protracted recession, prolonged mass unemployment and deflation (unless Germany accepts a massively weak euro) widespread household and corporate default bank default risk of government default Adjustment via the income account: default may reduce net interest payments to the rest of the world, but this is probably not enough on its own Adjustment via the transfers account: foreign countries make gifts large enough to offset trade and income deficits and thus avoid the need for either competitiveness improvement (or ultimate default) or immediate default.

The single currency as a straitjacket 70.00 40.00 Required euro % change expressed as a log change - (implied Euro/Dollar rate) 2.35 10.00-20.00-50.00 (1.34) (1.11) (1.29) -80.00-110.00-140.00-170.00 (0.53) (0.34) (0.31) Ireland Greece Spain France Italy Portugal Germany * Estimated with adapted Obstfeld-Rogoff (2004) methodology.

Euro-area current account imbalances are enormous 16 14 Imports Plus Exports as % of GDP 15% 1 Full Employment Current Account Balance as % of Imports Plus Exports 12 5% 10 8-5% 6-1 4 2-15% -2-25% -3 Ireland* Greece Spain France Italy Portugal Germany Ireland* Greece Spain France Italy Portugal Germany *Because of the kit-assembly nature of much of the Irish economy, the ratio of imports and exports as % of GDP overstates the size of the tradable sector.

Exposures of bank systems to Ireland, Portugal, Spain and Greece combined (by sector) Bank Exposures to Ireland,Portugal, Spain and Greece combined (by Sector) US$ bn 600 Public sector Other Non-bank private sector Banks 500 400 300 68.2 205.8 105.6 106.3 62.8 29.4 21.6 98.8 200 178.1 193.5 230.1 8.9 190.7 28.7 8.3 100 33.4 81.6 103.3 111.3 34.4 71.9 0 10.2 19.3 Germany Spain France Italy Other Eurozone United Total 464.8 129.5 493.3 95.5 Kingdom Source: BIS,as of Dec 2009 397.0 422.3 Note: Bank, Non-bank & Public Sector exposures are on an ultimate risk basis. Other Exposures include derivative contracts, guarantees, and credit commitments (Germany does not report this).

PIIGS countries debts and risks for Europe s banks Exposure of Europe s Banking System to PIIGS Countries As of end of December 2009 (US$ billions), estimated on ultimate risk basis 1 Greece Ireland Italy Portugal Spain Creditor Total Austria 4.77 7.82 25.49 2.91 8.81 49.80 Belgium 4.69 34.65 28.75 5.93 27.81 101.83 France 78.82 52.09 507.79 44.94 211.17 894.81 Germany 45.00 183.76 189.68 47.38 237.98 703.80 Greece - 0.61 0.71 0.12 0.41 1.85 Ireland 8.57-45.62 5.45 31.70 91.35 Italy 6.86 17.42-6.70 31.18 62.17 Netherlands 12.21 28.18 69.07 14.14 119.72 243.31 Portugal 9.80 8.70 5.39-28.81 52.69 Spain 1.21 14.61 47.15 84.97-147.95 Sweden 0.68 4.02 2.74 0.47 5.84 13.75 Switzerland 3.73 17.21 19.81 4.00 21.29 66.03 UK 15.35 172.68 76.46 25.57 109.96 400.02 US 16.56 57.05 53.24 4.67 58.04 189.57 Debtor Total 208.25 598.80 1,071.90 247.25 892.72 3,018.92 Source: BIS 1 The data cover contractual (immediate borrower) and ultimate risk lending by the head office and all its branches and subsidiaries on a worldwide consolidated basis, net of inter-office accounts. Reporting of lending in this way allocates claims to the bank entity that would bear the losses as a result of default by borrowers. To reflect the fact that banks country risk exposure can differ substantially from that of contractual lending due to the use of risk mitigants such as guarantees and collateral, reporting countries provide information on claims on an ultimate risk basis (ie contractual claims net of guarantees and collateral) since June 1999.