If you like the Greek debt crisis, you'll love the Puerto Rico meltdown

The governor of Puerto Rico told the New York Times that the island cannot pay back it's $72-billion debt and will seek permission from its creditors to defer payments.

The news precedes an address by Governor Alejandro Garcia to the Puerto Rican legislature, where he will unveil a budget that cuts about $670 million from a $9.8-billion budget, while setting aside another $1.5 billion to pay the debt.

Fox News:

Gov. Alejandro Garcia Padilla's spokesman, Jesus Manuel Ortiz, confirmed that the island's government is seeking to defer payments while negotiating with creditors.

He confirmed comments by Garcia that appeared in a report in The New York Times published late Sunday, less than a day before Garcia is scheduled to deliver a public address amid debate on 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.

"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.

The island's debt figure is four times that of Detroit, according to the Washington Post.

Puerto Rico's bonds were popular with U.S. mutual funds because they were tax-free, but hedge funds and distressed-debt buyers have been stepping in to buy up the debt as the island's economy worsened and its credit rating dropped.

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, said Rep. Jenniffer Gonzalez, spokeswoman for the main opposition party.

She said in a phone interview that she was taken aback by Garcia's comments, which came out just hours before he was scheduled to meet with legislators.

"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 central government could run out of cash as soon as July, possibly leading to a government shutdown, according to the Wall Street Journal.

“This is going to be painful for the next two to three years,” Rep. Pedro Pierluisi, D-Puerto Rico, told the paper. Pierluisi, the Resident Commissioner of Puerto Rico, is the island's non-voting representative to the U.S. House.

Garcia may seek permission from the U.S. Congress to declare bankruptcy.  This is currently against the rules, but it might be a way out for the cash-strapped Puerto Rican government.  Restructuring its debt could be the answer in the short run, but long-term answers to the basic problems in the Puerto Rican economy would still need to be addressed.

Puerto Rico isn't Greece.  But its problems are similar in that shortsighted decisions by the government and a ruinously bad economy have combined to create this crisis.  There's still time for Puerto Rico to pull back from the precipice if the political will is there to do what is necessary.

The governor of Puerto Rico told the New York Times that the island cannot pay back it's $72-billion debt and will seek permission from its creditors to defer payments.

The news precedes an address by Governor Alejandro Garcia to the Puerto Rican legislature, where he will unveil a budget that cuts about $670 million from a $9.8-billion budget, while setting aside another $1.5 billion to pay the debt.

Fox News:

Gov. Alejandro Garcia Padilla's spokesman, Jesus Manuel Ortiz, confirmed that the island's government is seeking to defer payments while negotiating with creditors.

He confirmed comments by Garcia that appeared in a report in The New York Times published late Sunday, less than a day before Garcia is scheduled to deliver a public address amid debate on 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.

"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.

The island's debt figure is four times that of Detroit, according to the Washington Post.

Puerto Rico's bonds were popular with U.S. mutual funds because they were tax-free, but hedge funds and distressed-debt buyers have been stepping in to buy up the debt as the island's economy worsened and its credit rating dropped.

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, said Rep. Jenniffer Gonzalez, spokeswoman for the main opposition party.

She said in a phone interview that she was taken aback by Garcia's comments, which came out just hours before he was scheduled to meet with legislators.

"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 central government could run out of cash as soon as July, possibly leading to a government shutdown, according to the Wall Street Journal.

“This is going to be painful for the next two to three years,” Rep. Pedro Pierluisi, D-Puerto Rico, told the paper. Pierluisi, the Resident Commissioner of Puerto Rico, is the island's non-voting representative to the U.S. House.

Garcia may seek permission from the U.S. Congress to declare bankruptcy.  This is currently against the rules, but it might be a way out for the cash-strapped Puerto Rican government.  Restructuring its debt could be the answer in the short run, but long-term answers to the basic problems in the Puerto Rican economy would still need to be addressed.

Puerto Rico isn't Greece.  But its problems are similar in that shortsighted decisions by the government and a ruinously bad economy have combined to create this crisis.  There's still time for Puerto Rico to pull back from the precipice if the political will is there to do what is necessary.