Monday, June 29, 2015

Puerto Rico Can’t Pay $72 Billion Debt, Governor Warns

Puerto Rico Can’t Pay $72 Billion Debt, Governor Warns

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SAN JUAN, Puerto Rico (AP) — The governor is warning that Puerto Rico can’t pay its $72 billion public debt, delivering another jolt to the recession-gripped U.S. island as well as a world financial system already worrying over Greece’s collapsing finances.
Gov. Alejandro Garcia Padilla is hoping to defer debt payments while negotiating with creditors, spokesman Jesus Manuel Ortiz said Sunday night.
The comments came as legislators debate a $9.8 billion budget that calls for $674 million in cuts and sets aside $1.5 billion to help pay off the debt. The budget has to be approved by Tuesday.
Ortiz confirmed comments by Padilla that appeared in a report in The New York Times published late Sunday, less than a day before Garcia planned to meet with legislators and then go on television to deliver a public address.
“There is no other option. I would love to have an easier option. This is not politics, this is math,” Garcia is quoted as saying in the Times.
Puerto Rico’s bonds were popular with U.S. mutual funds because they were tax-free, but hedge funds and distressed-debt buyers began stepping in to buy up debt as the island’s economy worsened and its credit rating dropped.
Some legislators were taken aback by Garcia’s comments, including Rep. Jenniffer Gonzalez, spokeswoman for the main opposition party.
“I think it’s irresponsible,” Gonzalez said. “He met privately with The New York Times last week, but he hasn’t met with the leaders of this island.”
Puerto Rico’s constitution dictates that the debt has to be paid before any other financial obligation is met. If Garcia seeks to not pay the debt at all, it will require a referendum and a vote on a constitutional amendment, she said in a phone interview.
Puerto Rico’s situation has drawn comparisons to Greece, where the government decreed this weekend that banks would be shuttered for six business days and restrictions imposed on cash withdrawals. The country’s five-year financial crisis has sparked questions about its continued membership in the 19-nation shared euro currency and the European Union.
Puerto Rico’s governor recently confirmed that he had considered having his government seek permission from the U.S. Congress to declare bankruptcy amid a nearly decade-long economic slump. His administration is currently pushing for the right for Puerto Rico’s public agencies to file for bankruptcy under Chapter 9. Neither the agencies nor the island’s government can file for bankruptcy under current U.S. rules.
Puerto Rico’s public agencies owe a large portion of the debt, with the power company alone owing some $9 billion. The company is facing a restructuring as the government continues to negotiate with creditors as the deadline for a roughly $400 million payment nears.
Garcia has taken several measures to help generate more government revenue, including signing legislation raising the sales tax to 11.5 percent and creating a 4 percent tax on professional services. The sales tax increase goes into effect Wednesday and the new services tax on Oct. 1, to be followed by a transition to a value-added tax by April 1.
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Everything You Should Know About Puerto Rico’s Economic Crisis 

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As Greece’s debt crisis grows increasingly dire, another territory much closer to home — Puerto Rico — has admitted to some major financial woes.
What exactly is happening in Puerto Rico?
Puerto Rico Governor Alejandro García Padilla made a worrisome announcement Sunday that the island cannot pay back its $72 billion in public debt, the New York Times reports. Padilla and his staff, according to the Times, are seeking to defer debt payments for as long as five years, while also possibly seeking concessions from many of its creditors.
“The debt is not payable,” García Padilla said. “There is no other option. I would love to have an easier option. This is not politics, this is math.”
Okay… in English, please?
Puerto Rico is in the midst of a decades-long economic struggle fueled by years of recession and slow economic growth. As a result, its government has taken out massive loans from creditors to cover its costs.
But Puerto Rico has to pay back the money (or figure out a Plan B). In recent years, the commonwealth has raised taxes and slashed pensions in order to pay back its loans, but the island’s “tab,” so to speak, has still spiraled out of control. Many residents have found their businesses collapsing — Puerto Rico’s unemployment rate is double that of mainland America — while others have been leaving the island for better opportunities state-side.
Financial markets across the world have already been rocked by Greece’s debt crisis, and Puerto Rico’s troubles will only add to the current global economic uncertainty.
What does this mean for Americans?
If you’re an investor in municipal bond funds, Puerto Rico’s debt might be your problem, too. Municipal bonds — or loans used by local governments to fund public projects — have traditionally been considered safe investments. But some investors are worried about them — several American cities have filed for bankruptcy in recent years, and the Puerto Rico situation could make things worse. According to the Washington Post, as many as three out of four municipal bond mutual funds held Puerto Rican bonds in 2013.
How bad is the situation exactly?
Padilla called the situation a “death spiral.” And he wasn’t exaggerating: Puerto Rico’s debt is four times that of Detroit’s, and the island has more debt per capita than any American state. Analysts believe the central government will run out of cash as soon as July, according to the Wall StreetJournal, which could lead to a government shutdown, emergency measures and an unpredictable crisis.
So what’s next for Puerto Rico?
Good question. While Padilla seeks to negotiate with creditors, his administration is also pushing for the right to file for bankruptcy under Chapter 9, which outlines a plan for creditors to get back some of their money. (That’s what happened with U.S. cities like Detroit, Mich., and Stockton, Calif., last year.) But under current law, that right is afforded only to U.S. cities, not to states or territories including Puerto Rico.
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AP Top News at 3:13 a.m. EDT

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AP Top News at 3:13 a.m. EDT
Dangerous men, careful plans and a bold escape for the agesNEW YORK (AP) - It was dawn in the cellblocks of Dannemora, time for a round of bed checks on the convicted killers, rapists and other criminals held behind stark 19th-century walls. Guards went along the lattice of light-green bars in "A" Block, where well-behaved prisoners are held. At first glance, it seemed David Sweat and Richard Matt were where they were supposed to be: asleep in their adjoining cells. But the lumps in their bunks were just sweatshirts. The convicted cop killer and the career criminal doing time for dismembering his boss had squeezed through holes neatly cut in the steel wall behind their beds, penetrated a brick wall and a steam pipe, and emerged from a manhole outside the Clinton Correctional Facility's 40-foot wall.
Troopers hunting escapees scrambled to save 1 they capturedMALONE, N.Y. (AP) - Some of the same state troopers who spent three weeks hunting down two escaped killers found themselves scrambling to get the lone survivor to a hospital, hoping to make him well enough to share the tale of how the pair managed to escape and stay on the run for so long. David Sweat was shot and captured Sunday afternoon when a single state police sergeant spotted a suspicious man walking on a rural road in Constable, near the Canadian border. He was in critical condition at an Albany hospital Sunday night.
Religious liberty is rallying cry after gay marriage rulingNEW YORK (AP) - Now that same-sex marriage is legal nationwide, religious conservatives are focusing on preserving their right to object. Their concerns are for the thousands of faith-based charities, colleges and hospitals that want to hire, fire, serve and set policy according to their religious beliefs, notably that gay relationships are morally wrong. The Republican Party's 2016 presidential candidates are already campaigning on the issue. And Wisconsin Gov. Scott Walker is urging President Barack Obama and the nation's governors "to join me in reassuring millions of Americans that the government will not force them to participate in activities that violate their deeply held religious beliefs."
Sputtering start to US military's training of Syrian rebelsWASHINGTON (AP) - Fewer than 100 Syrian rebels are currently being trained by the U.S. military to fight the Islamic State group - just a tiny total for a sputtering program with a stated goal of producing 5,400 fighters a year. Critics question whether it can produce enough capable fighters quickly enough to make a difference.
Political opposition groups want to tear down 2016 hopefulsWASHINGTON (AP) - You just know it will happen: A 2016 presidential candidate will be caught in an embarrassing moment and it will end up everywhere online and perhaps in an attack ad by the other side. When it happens, there will be a good chance that a political opposition research group was behind it.
Puerto Rico governor says island can't pay its public debtSAN JUAN, Puerto Rico (AP) - The governor is warning that Puerto Rico can't pay its $72 billion public debt, delivering another jolt to the recession-gripped U.S. island as well as a world financial system already worrying over Greece's collapsing finances. Gov. Alejandro Garcia Padilla is hoping to defer debt payments while negotiating with creditors, spokesman Jesus Manuel Ortiz said Sunday night.
Solar Impulse plane en route to Hawaii from JapanTOKYO (AP) - A solar-powered plane took off from Japan early Monday to attempt a five-day flight over open water to Hawaii, the eighth leg of its bid to fly around the world without fuel. Its long wings lighting up the night sky, the Solar Impulse 2 departed at 3:03 a.m. after an unscheduled, month-long stop in Japan because of unfavorable weather.
Chris Brown, Nicki Minaj, Beyonce win big at BET AwardsThough she was absent, Beyonce won three BET Awards, including video of the year for "7/11," while Chris Brown and Nicki Minaj also won multiple awards at the all-star show Sunday night. But the show was less about the awards - video of the year didn't even make the live broadcast - as performances stole the night.
Athletes adjusting to cameras all over arenas, stadiumsWhen LeBron James pulls into the parking lot at Quicken Loans Arena, there are cameras waiting. They follow him into the arena, record him walking down the hall to the locker room. They are there when he's changing into his uniform. They are there in the huddles during timeouts and there during the halftime meetings as coach David Blatt details adjustments for the second half.

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AP Top News at 7:08 a.m. EDT

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AP Top News at 7:08 a.m. EDT
Pensioners queue outside Greek banks amid withdrawal limitsATHENS, Greece (AP) - Banks and ATM machines were shut throughout Greece on Monday, the first day of capital controls announced by the government in a dramatic twist in the country's five-year financial saga. Despite the closures, pensioners lined up just after dawn at bank branches hoping they would be able to receive their pensions, which were due to be paid Monday. The finance ministry said the manner in which pensions would be disbursed would be announced later in the afternoon.
The Latest: Merkel indicates compromises needed on GreeceATHENS, Greece (AP) - The latest news on Greece's financial woes as it closes its banks and limits money withdrawals (all times local): ---
10 Things to Know for TodayYour daily look at late-breaking news, upcoming events and the stories that will be talked about today: 1. GREEK BANKS REMAIN SHUT AS ECONOMIC CRISIS DEEPENS
Tunisia struggles to find balanced response to terrorTUNIS, Tunisia (AP) - Tunisia has reason to fear a terror attack. The only democracy that emerged from the turmoil of the 2011 Arab Spring has seen more of its young men join the Islamic State group than any other nation, and many have returned, battle-hardened, to spread radical ideologies back home. It's also a country full of vulnerable targets, with an economy that depends on welcoming European tourists to its warm Mediterranean shore. Despite having so much at stake, the shocking slayings of 22 tourists at the national museum in March failed to persuade lawmakers to resolve their debate over an anti-terror strategy proposed more than a year earlier. Only now - after a single jihadi from a gritty Tunisian town was able to kill 38 tourists at a seaside resort - does the government appear ready to launch a comprehensive response.
WASHINGTON (AP) - Fewer than 100 Syrian rebels are currently being trained by the U.S. military to fight the Islamic State group, a tiny total for a sputtering program with a stated goal of producing 5,400 fighters a year. The training effort is moving so slowly that critics question whether it can produce enough capable fighters quickly enough to make a difference. Military officials said last week that they still hope for 3,000 by year's end. Privately, they acknowledge the trend is moving in the wrong direction.
WASHINGTON (AP) - It was the perfect loop: The Republican opposition research group America Rising finds footage of Democratic Senate candidate Bruce Braley in agriculture-loving Iowa, seeming to put down the intelligence of farmers. That footage becomes part of a 30-second TV ad, by the super PAC American Crossroads, boosting the Republican candidate, Joni Ernst. Ernst wins. So does America Rising, which used that episode in Iowa last year to show prospective clients and donors what it can do.

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Serbia Unveils Monument To Controversial Historical Figure

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Serbia has unveiled a monument to Gavrilo Princip, whose assassination of the Austro-Hungarian crown prince Archduke Franz Ferdinand in Sarajevo helped spark World War I.

Briefing: Russia Reacts To U.S. LGBT Ruling

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A U.S. Supreme Court ruling resonates in Russia. And Moscow tries a soft approach with Armenia.

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Britain's Cameron Says IS Planning Attacks 'In Britain'

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British Prime Minister David Cameron has said militants from the Islamic State (IS) group are plotting "terrible acts in Britain and elsewhere."

Russia Says Farewell To Former Premier Primakov

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Russians are bidding farewell to former Prime Minister Yevgeny Primakov, who died on June 26 at the age of 85.

Russia Offers Ukraine Reduction In Gas Price

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Russian Prime Minister Dmitry Medvedev says natural-gas prices for Ukraine will be reduced to $247 per 1,000 cubic meters.

Lavrov, Kerry To Hold Vienna Talks On June 30

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Russia's foreign minister will meet with U.S. Secretary of State John Kerry in Vienna on June 30.

Top Shots

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Some of the most compelling photographs from RFE/RL's broadcast region and beyond. For more photo galleries, see our "Picture This" archive.

Illegal Amber Digging Lays Waste To Ukrainian Forest

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Industrial-scale mining is causing devastation to swathes of forest in western Ukraine. The country's interior ministry says the business is controlled by criminal gangs that make up to $500 million a year. Despite the fact that the activity is illegal, the gangs carry out their work quite openly. The police say they don't have the resources to stop it – but activists say local officials have been paid off. (RFE/RL's Ukrainian Service)

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Op-Ed Contributor: The Pope's Ecological Vow

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Climate change skeptics may well find that in Francis they have met their most formidable opponent.

Puerto Rico’s Governor Says Island’s Debts Are ‘Not Payable’

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Gov. Alejandro García Padilla said that his administration would probably seek significant concessions from its creditors on a $72 billion debt load.

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