4. The serial defaulters hypothesis (1)

6. The global crisis hypothesis (1)

8. Market access? default probability market access countries 27% non-market access countries 43%

9. US business cycle? default probability years where there is a recession in the US (NBER) 33% years where there is no recession in the US (NBER) 38%

11. Serial Defaulters revisited Outliers: The Gambia (3 times), Ghana (3), Grenada (3), Kenya (4), Turkey (3) and Uruguay (3).

12. Global crisis revisited

13. Non-Market Access Countries experience longer crises

16. Results *** denotes 1% significance, ** denotes 5% significance, * denotes 10% significance debt distress=1 log (debt/GDP) t-2 0,523*** total debt service/exports t-2 3,943*** real gdp per capita t-2 -0,379*** cpia t-2 -0,577*** Baa US corporates spread 0,611*** intercept 0,718 N 1159 Pseudo R² 0,0987 Prob>Chi2 0,0000

17. Quintiles of risk (1) default probability A p < 2,5% B 2,5%< p <4,4% C 4,4%< p <7,1% D 7,1%< p <11,3% E 11,3%< p

18. Quintiles of risk (2)

19. Dynamics in risk classification

21. The sources of risk (2) In order to measure the influence of each variable on the default probability, we computed the average value of each variable (weighted by its coefficient in the regression) for each risk category A, B, C, D and E.

23. Risk Probabilities (2)

25. Greek crisis

27. The spiral BPs October 4 - Papandreou's Panhellenic Socialist Movement (PASOK) party wins power. At this stage, the government expects the 2009 deficit to reach 6% of GDP December 16 - S&P cuts Greece’s rating to BBB+ from A- December 22 - Moody’s cuts Greek debt to A2 from A1 January 14 - Greece unveils a stability program w/ budget gap cut to 2.8% of GDP in 2012 from 12.7 in 2009 February 3 - The EU Commission says it backs Greece’s plan to reduce its budget deficit below 3% of GDP by 2012 March 5 - New package of public sector pay cuts and tax increases March 25 - Euro zone leaders agree to create a joint financial safety net for Greece with the IMF April 11 - Euro zone finance ministers approve a €30 bn emergency aid mechanism for Greece April 27 - S&P downgrades Greece’s credit rating to junk status May 2 - Greece seals deal with EU and IMF opening door to 110 bn euro bailout in exchange for extra budget cuts of €30 bn over 3 years May 18 - Greece receives a € 14.5 bn loan from the EU and can now repay its immediate debt December 8 - Fitch Ratings cuts Greek debt to BBB+ w/ a negative outlook November 5 – The new government pledges to save Greece from banruptcy by cutting the budget deficit June 14 - Moody’s cuts Greece’s credit rating 4 notches to Ba1 (or junk status) over risks to an EU / IMF package February 2 - Government extends a public sector wage freeze to those making below €2,000 a month for 2010

31. Former European episodes (3) IRELAND SUÈDE

32. Previous Greek adjustment 1992-2002

35. Spreads et notations: l’Uruguay 2002

36. Spreads and ratings: Brazil, 1998-99

37. Spreads and ratings: Greece

38. Spreads before and after « watch negative »

39. Spreads before and after a positive outlook annoucement