Puerto Rico faces its own debt crisis

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http://www.dw.com/en/puerto-rico-faces-its-own-debt-crisis/a-18546815

Another national debt crisis is simmering, but this time it's far from the warm waters of the Mediterranean. The governor of Puerto Rico has warned that the Caribbean island cannot pay $72 billion in public debt.

Puerto Rico faces its own debt crisis
29.06.2015

"This is not politics, this is math," Governor Alejandro Garcia Padilla said in an interview with The New York Times that was published late Sunday. "The debt is not payable."

His statement swiftly drew comparisons to Greece, where banks will stay closed for six days to stem capital flight before a referendum on a cash-for-reforms bailout deal for the indebted eurozone member.

Puerto Rico, a US commonwealth, has accrued massive amounts of debt in the past decade as investors' fears became more acute that the government was running out of money. Its bonds were once popular with American mutual funds because they were tax-free. But once the economy worsened, hedge funds began scooping them up as the country's credit rating dropped.

Unlike other municipalities, such as Detroit, Puerto Rico cannot declare bankruptcy due to its commonwealth status. This would make managing a default much more difficult.