Investment Research General Market Conditions

05 October 2011

Economic Fact Book Greece

Following the 2009 general elections it became clear that the statistics on Greek government debt and deficit were flawed (as was also the case when Greece joined the euro area) and the financial markets started to lose confidence in Greece. In early-May 2010 Greece received a EUR110bn rescue package from the EU and the IMF. However, the situation has not improved sufficiently and euro area leaders have endorsed a second bailout. Nevertheless the sixth aid transfer for Greece is currently being delayed, which makes the EU able to keep high reform pressure on Greece, but it also implies continued uncertainty about Greeces fiscal sustainability. Another contributor to uncertainty is a revision of the private sector involvement (PSI) agreement reached in July. Greece is not able to meet its fiscal targets and the government deficit is expected to be 8.5% of GDP in 2011. This implies that a difficult restructuring of government debt is a risk in the shorter term and seems likely in the longer term. Greece has a significant amount of reform potential. In the World Banks business report, it is ranked 109th of 183 countries in terms of how easy it is to do business. This is 100 places below Ireland. Greece scores poorly on the ease of starting a business, registering property and protecting investors. Corruption is another area where there is room for improvement. Transparency Internationals Corruption Perception Index ranks Greece 78th out of 178 countries, putting it on a level with Colombia, Peru and China. The tax collection system is inefficient and has caused all kinds of anecdotes about tax evasion and a large scale black economy. Similarly the social benefit system is flawed. Strikes and protests are common in Greece. Recently protests reflecting disagreement with the harsh but necessary austerity measures have drawn much media attention. Anger is partly directed toward the EU and the IMF, but even more so there is dissatisfaction with the distributional consequences of both implemented and planned measures. Prior to the debt crisis wages grew notably more than productivity and as a result the economy became increasingly uncompetitive. An expanding public sector added to the problem. As a result the trade deficit widened to as much as 20% of GDP in 2008. Exports only amount to a small share of the economy and Greece consequently benefits less from the global recovery than, for example, the very export-oriented Irish economy.

Key facts

Population:10.8m ( 2010). GDP per capita: EUR20,575 12th highest in euro area (2010). Government type: Parliamentary Republic. President: Karolos Papoulias. Majority coalition led by PASOK. Prime Minister: Giorgos (George) A. Papandreou. Next general elections: 2013. Central Bank Governor: Georgios Provopoulos.

Economic characteristics

Unsustainable fiscal situation. Large trade and current account deficits. Uncompetitive economy with much red tape and many protected professions. Fiscal tightening causing the economy to shrink. Inefficient tax collection system.

Outlook for key economic variables

Greece IMF OECD EU (Commission) GDP (1) CPI (1) Unemployment (2) Govt. Budget (3) Govt. Debt (3) 2011 16.5 16.0 15.2 2012 18.5 16.4 15.3 2011 -8.0 -7.5 -9.5 2012 -6.9 -6.5 -9.3 2011 2012

2011 2012 2011 2012 -5.0 -2.9 -3.5 -2.0 0.6 1.1 2.9 2.9 2.4 1.0 0.7 0.5

Senior Economist Frank land Hansen +45 4512 8526 franh@danskebank.dk Analyst Anders Mller Lumholtz +45 4512 8498 andjrg@danskebank.dk Assistant Analyst Pernille Bomholdt Nielsen +45 4512 8229 pernni@danskebank.dk

165.6 189.1 157.1 159.3 n.a. n.a.

1) % y/y. 2) % of labour force. 3) % of GDP.

Sources: OECD, IMF, European Commission, Danske Markets.

Important disclosures and certifications are contained from page 7 of this report. www.danskeresearch.com

/ Economic Fact Book Greece

Key macroeconomic indicators

Structural indicators

Greece versus the euro area (EMU)

When Greece EMU
GDP(1) Public sector (2) Private cons (2) Investments (2) Exports (2) C/A (2) - 12M av. Unemployment (3) Household loans (2) Q2-11 2010 Q2-11 Q2-11 Q2-11 Q2-11 Jun-11 2010 0.2 49.8 77.4 12.5 24.5 -10.4 16.3 60.0 0.2 GDP per capita (5)

When Greece
2010

EMU

Sovereign ratings
CC Ca CCC

20,575 27,799 S&P 2.9% 2.5 -4.3 87.9 4.2 18.9 Moody's Fitch

50.9 Economic size in EMU (4) 57.7 Inflation - HICP (8) 19.9 Public budget (2) EC fcst 43.7 Public debt (2) EC fcst -0.4 Long-term interest rates 10.0 Manufacturing sector (2,7) 65.0 Aug-11 2011 2011 Aug-11 Q2-11

1.4 -9.5 157.7 15.9 n.a.

Sovereign bond spreads

2Y spread (6) 4442.8

10Y spread (6) 1582.24

1: % q/q, 2: Pct of GDP , 3: % of labour force, 4: based on ECB capital key ratios, 5: EUR per capita, 6: sov spread vs.Germany, bp, 3M av, 7: Weighted average of Germany France, Italy and Spain, 8: % y/y

Sources: Reuters EcoWin and Danske Markets

Public finances
Budget deficit remains elevated
0.0 % of GDP -2.5 -5.0 -7.5 -10.0 General Govt budget, EC forecast -12.5 -15.0 -17.5 00 02 04 06 Euro area 0.0 -2.5 -5.0 -7.5 -10.0 Greece -12.5 -15.0 -17.5 08 10 12

Budget gap
55.0 % of GDP 52.5 Government budget, 50.0 1-year MA 47.5 45.0 42.5 40.0 37.5 35.0 00 01 02 03 04 05 06 07 08 09 10 Revenue Expenditure 55.0 52.5 50.0 47.5 45.0 42.5 40.0 37.5 35.0

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

Sharply increasing government debt

170 160 % of GDP 150 General Govt debt, 140 EC forecast 130 120 110 100 90 80 70 60 00 02 04 06 % of GDP Greece 170 160 150 140 130 120 110 100 90 80 70 60

Government bond spreads

80 pp 70 60 Government bonds spread 2 year to Germany, 20-day MA 50 40 30 20 10 year 10 0 -10 05 06 07 08 09 10 11 80 70 60 50 40 30 20 10 0 -10

Euro area

08

10

12

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

2|

05 October 2011

www.danskeresearch.com

/ Economic Fact Book Greece

National Account
The economy shrinks
140 Index, 2000=100 135 Greece 130 GDP in constant prices 125 120 115 110 Euro area 105 100 95 00 01 02 03 04 05 06 07 08 09 10 140 135 130 125 120 115 110 105 100 95

A large drop in consumption

140 Index, 2000=100 135 Private consumption, 130 constant prices 125 120 115 110 105 100 00 01 02 03 04 05 06 07 08 09 10 Euro area 140 135 Greece 130 125 120 115 110 105 100

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

A large output gap

2.5 % of GDP 0.0 -2.5 -5.0 -7.5 Output gap -10.0 -12.5 00 Greece 02 04 06 08 10 12 -10.0 -12.5 USA Eurozone OECD total 2.5 0.0 -2.5 -5.0 -7.5

Declining investments
130 Index, 2000=100 120 110 100 90 80 70 60 00 01 02 03 04 05 06 07 08 09 10 Gross capital formation, constant prices Greece Euro area 130 120 110 100 90 80 70 60

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

Export and trade

Current account deficit
2.5 0.0 -2.5 -5.0 -7.5 -10.0 -12.5 -15.0 -17.5 00 02 04 06 08 10 12 % of GDP Euro area, Ecofin forecast Current account, SA Greece, Ecofin forecast 2.5 0.0 -2.5 -5.0 -7.5 -10.0 -12.5 -15.0 -17.5

Exports by commodity
650 EUR bn, per month 600 Exports by commodity, 550 SA, 3-months MA Manufactured 500 goods 450 400 350 Food products 300 250 Chemicals 200 150 Machinery 100 05 06 07 08 09 10 11 650 600 550 500 450 400 350 300 250 200 150 100

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

Not a very export-oriented economy

45 % of GDP 40 35 30 25 20 15 00 01 02 03 04 05 06 07 08 09 10 Euro area Greece Exports as a share of GDP 45 40 35 30 25 20 15

Export growth
25 y/y % Exports, SA 20 15 10 5 0 -5 Euro area -10 -15 Greece -20 -25 00 01 02 03 04 05 06 07 08 09 10 25 20 15 10 5 0 -5 -10 -15 -20 -25

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

3|

05 October 2011

www.danskeresearch.com

/ Economic Fact Book Greece

Industry
Industrial production and orders
110 Index, 2007=100 105 100 95 Production 90 85 80 Manufacturing, 75 SA, 3-month MA New orders 70 65 05 06 07 08 09 10 11 110 105 100 95 90 85 80 75 70 65

Capital goods looking particularly weak

120 Index, 2005=100 110 100 90 80 70 60 50 40 05 06 07 Industrial activity, SA, 3-month MA Consumer goods, durable Capital goods 08 09 10 11 Intermediate goods 120
Consumer goods, non-durable

110 100 90 80 70 60 50 40

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

Leading indicators
Consumers remain pessimistic
30 Diffusion index 20 10 Consumer index, SA 0 Expectations -10 -20 -30 -40 -50 -60 Confidence -70 -80 00 01 02 03 04 05 06 07 08 09 10 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 -80

Low capacity utilisation

90.0 87.5 85.0 82.5 80.0 77.5 75.0 72.5 70.0 67.5 65.0 62.5 % Capacity utilisation, manufacturing sector, s.a. Euro area 90.0 87.5 85.0 82.5 80.0 77.5 75.0 72.5 70.0 67.5 65.0 62.5

Greece 00 01 02 03 04 05 06 07 08 09 10

Sources: Reuters EcoWin and Danske Markets

Sources: OECD

Low manufacturing sector confidence

65 60 55 50 45 40 35 30 00 PMI, Manufacturing, SA Greece Diffusion index 65 Euro area 60 55 50 45 40 35 30 02 04 06 08 10 12

Low service sector confidence

70 Difusion index 60 Business climate 50 Business survey, 40 services 30 20 10 0 -10 -20 -30 Confidence indicator -40 00 01 02 03 04 05 06 07 08 09 10 70 60 50 40 30 20 10 0 -10 -20 -30 -40

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

4|

05 October 2011

www.danskeresearch.com

/ Economic Fact Book Greece

Construction and the housing market

Construction sector has adjusted
8.5 % of GDP Construction sector 8.0 as share of GDP, SA 7.5 7.0 Euro area 6.5 6.0 5.5 5.0 4.5 Greece 4.0 00 01 02 03 04 05 06 07 08 09 10 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0

House prices decline

200 175 150 125 100 75 50 98 00 02 04 06 08 10 Index, 2000=100 Dwelling prices Athens 200 175 150 125 100 75 50

Other urban areas

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

5|

05 October 2011

www.danskeresearch.com

/ Economic Fact Book Greece

Labour market and demographics

Unemployment has tripled
15 14 13 12 11 10 9 8 7 94 96 98 00 02 04 06 08 10 Euro area % Unemployment rate, SA Greece 15 14 13 12 11 10 9 8 7 102.5 100.0 00 102.5 100.0 02 04 06 08 10 110.0 107.5 105.0

Employment is declining
115.0 112.5 Employment, SA Index, 2000=100 115.0 Greece 112.5 110.0 Euro area 107.5 105.0

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

Unit labour cost is declining

7 5 3 1 -1 -3 -5 00 Unit labour cost, growth Euro area y/y % Greece 7 5 3 1 -1 -3 -5 02 04 06 08 10 12

Population growth
10.8 Millions 10.7 10.6 10.5 10.4 10.3 10.2 10.1 10.0 90 << Total population, forecast 00 10 20 30 40 Growth in population >> % 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

Other competitiveness indicators

Real effective exchange rate
125 120 115 110 105 100 95 90 85 00 02 Greece Euro area Index, 2000=100 125 120 115 110 105 100 95 90 85 04 06 08 10

Price developments
150 Index, 2000=100 145 Greece 140 Harmonized consumer 135 prices, SA 130 125 120 Euro area 115 110 105 100 00 01 02 03 04 05 06 07 08 09 10 150 145 140 135 130 125 120 115 110 105 100

Real effective exchange rate

Sources: Reuters EcoWin and Danske Markets

Sources: Reuters EcoWin and Danske Markets

6|

05 October 2011

www.danskeresearch.com

/ Economic Fact Book Greece

Disclosure
This research report has been prepared by Danske Research, a division of Danske Bank A/S ("Danske Bank"). The author of the research report is Frank land Hansen, Senior Analyst. Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analysts personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorized and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Services Authority (UK). Details on the extent of the regulation by the Financial Services Authority are available from Danske Bank upon request. The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts rules of ethics and the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high quality research based on research objectivity and independence. These procedures are documented in the research policies of Danske Bank. Employees within the Danske Bank Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to the Research Management and the Compliance Department. Danske Bank Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the over-all profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors upon request. Risk warning Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis of relevant assumptions, are stated throughout the text. First date of publication Please see the front page of this research report for the first date of publication. Price-related data is calculated using the closing price from the day before publication.

General disclaimer
This research has been prepared by Danske Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ("Relevant Financial Instruments"). The research report has been prepared independently and solely on the basis of publicly available information which Danske Bank considers to be reliable. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness, and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report. The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgment as of the date hereof. These opinions are subject to change, and Danske Bank does not

7|

05 October 2011

www.danskeresearch.com

/ Economic Fact Book Greece

undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in the research report. This research report is not intended for retail customers in the United Kingdom or the United States. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Banks prior written consent.

Disclaimer related to distribution in the United States

This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to "U.S. institutional investors" as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United States solely to U.S. institutional investors. Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA, but satisfy the applicable requirements of a non-U.S. jurisdiction. Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in nonU.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission.

8|

05 October 2011

www.danskeresearch.com