Gov. Alejandro Garcia Padilla said Monday that international creditors need to lighten Puerto Rico's nearly $73 billion public debt burden.
In a televised speech, Garcia said, given the state of its economy, Puerto Rico's public debt is unpayable. He cited a report by a former chief economist of the World Bank that recommends lenders consider easier terms for the island. Padilla said he will go further and seek a multi-year moratorium on debt payments to allow the island time to rebuild its economy.
The governor also said he wants the law changed to make the island able to file for bankruptcy protection, Reuters reports.
" 'Puerto Rico needs a complete restructuring and development plan, comprehensive and inclusive, that takes care of the immense problem we face today, not on a short but on a long-term and definitive basis,' Garcia Padilla said. 'The alternative would be ... halting of payments with all the negative consequences that this implies.'
"Garcia Padilla said the next step must be to get creditors to agree to more favorable payment terms. He is establishing a working group to examine restructuring public debt, with a deadline to have a plan by Aug. 30. The legislature is required to approve the plan."
NPR's Jim Zarroli reported on Puerto Rico's financial situation earlier:
"With the bond markets all but closed to the commonwealth... any solution to Puerto Rico's troubles is likely to involve some type of federal help. Economist Arturo Porzecanski teaches at American University.
" 'What Greece is for the Eurozone, that's what Puerto Rico is going to become for us. It's going to become a territory that we're going to have to subsidize even more than before, get more tax breaks, eventually give federal aid.'
"But there are important differences that mitigate Puerto Rico's risk to the financial system. Puerto Rico is a tiny part of the US economy... even smaller than Greece is to the Eurozone. And because the island is a U.S. territory, its banks are already guaranteed by the Federal Deposit Insurance Corporation. That prevents the kind of bank runs now plaguing Greece."
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