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Puerto Rico defaults for 1st time ever; is ‘death spiral’ next?

by on Aug.03, 2015, under News Events

© Alvin Baez
The Commonwealth of Puerto Rico is now in default for the first time in history after it only paid $628,000 of a $58 million debt payment it owed over the weekend.

According to the Government Development Bank for Puerto Rico (GDB), the commonwealth simply did not have the cash to make the bond payment owed to the Public Finance Corporation (PFC). Puerto Rico is currently some $72 billion in debt.

“Due to the lack of appropriated funds for this fiscal year the entirety of the PFC payment was not made today (the first business day after the Saturday deadline),” GDB President Melba Acosta-Febo said in a statement.

READ MORE: Debt-ridden Puerto Rico fails in bid for municipal bankruptcy rights

“This was a decision that reflects the serious concerns about the Commonwealth’s liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained.”

As a result of the tiny payment, the credit rating agency Moody’s said that Puerto Rico has defaulted on its debts.

“Moody’s views this event as a default,” Emily Raimes, vice president at Moody’s Investors Service, said in a statement toCNBC. “Debt service on these bonds is subject to appropriation, and the lack of appropriation means there is not a legal requirement to pay the debt, nor any legal recourse for bondholders.”

Raimes added that it does not believe the island has enough cash to make all the payments it needs do, and that similar news is on the way.

“This event is consistent with our belief that Puerto Rico does not have the resources to make all of its forthcoming debt payments,” she said. “This is a first in what we believe will be broad defaults on commonwealth debt.”

According to CNN, Puerto Rico owed a monthly debt payment of $483 million. The vast majority of that was actually paid except for the $58 million owed to PFC, something the outlet described as a strategic decision since that debt is owned by credit unions and Puerto Ricans – mainly retirees – who don’t have much of a chance to battle the move in the courts.

READ MORE: ​No federal bailout for Puerto Rico – White House

The next step in the process could involve Puerto Rico and the PFC getting together to negotiate some kind of restructuring plan. It’s possible that such a plan will push the island’s government to back austerity by raising taxes and lowering spending.

In June, Puerto Rico Governor Alejandro Garcia Padilla said the commonwealth cannot pay its debt and warned that a “death spiral” could occur if restructuring wasn’t possible.

“There is no other option. I would love to have an easier option. This is not politics, this is math,” Garcia said at the time. “My administration is doing everything not to default … But we have to make the economy grow. If not, we will be in a death spiral.”

The White House has already ruled out providing the commonwealth with a bailout, and since the island is not a municipality of a state, it does not qualify for bankruptcy. The Obama administration said it would ask Congress to look into the possibility of allowing Puerto Rico to do so, but it’s unclear how lawmakers will act in response to the situation.

“There’s no one in the administration or in DC that’s contemplating a federal bailout of Puerto Rico,” White House spokesman Josh Earnest said in June. “But we do remain committed to working with Puerto Rico and their leaders as they address the serious challenges.”

Puerto Rico’s problems run the gamut from a heavily damaging, decade-long recession and high unemployment to government mismanagement and excess spending. Between 2010 and 2013, some 48,000 people left Puerto Rico to find jobs in the US mainland every year.

One resident, 26-year-old Omar Rodriguez, just recently left with his family and moved to Austin, Texas, where both he and his wife obtained jobs.

“I wouldn’t imagine having the same quality of life in Puerto Rico at the moment and that saddens me,” Rodriguez said to CNN. “Saying goodbye to my parents …it was a bit unbearable.”

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Moscow will respond to NATO approaching Russian borders ‘accordingly’ – Putin

by on Jun.16, 2015, under News Events

Published time: June 16, 2015 21:17

Russian president Vladimir Putin. (RIA Novosti/Michael Klimentyev)

Russian president Vladimir Putin. (RIA Novosti/Michael Klimentyev)

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If NATO threatens Russia’s territories Moscow will respond to the threat accordingly, said President Vladimir Putin. This comes after he announced Russia’s strategic forces will be getting over 40 new intercontinental ballistic missiles in 2015.

“If someone threatens our territories, it means that we will have to aim our armed forces accordingly at the territories from where the threat is coming. How else could it be? It is NATO that approaching our borders, it’s not like we are moving anywhere,” Putin said speaking at a joint media conference with Finland’s President Sauli Niinisto in Moscow on Tuesday.

He said at the moment he sees no threat in the alliance’s activities, since the missile defense system wide deployment is a bigger threat.

“I’d refrain from whipping up emotions. Of course, we will analyze everything but so far I see nothing that might prompt us to [take responsive measures],” he said. “What worries us more is the anti-missile defense system that is being deployed – that is a significant thing of strategic importance.”

The comments come after The New York Times ran a piece Saturday, which said the Pentagon could store “battle tanks, infantry fighting vehicles and other heavy weapons for as many as 5,000 American troops in several Baltic and Eastern European countries.”

Day later, Poland and Lithuania revealed on-going talks with Washington to host US military equipment warehouses. This prompted a harsh reaction from Moscow; Russia warned that it has no binding obligations limiting its armed forces in its Western region.

“Russia will have no other choice but to boost its military potential along its western borders,” General Yury Yakubov, a senior Defense Ministry official told Interfax Monday. He added that a military buildup would affect tactical groupings in the Belarus and Kaliningrad region.

On Tuesday morning Putin stated that in 2015 Russia’s strategic forces will be getting over 40 new intercontinental ballistic missiles (ICBMs).

In response to all these statements, NATO Secretary General Jens Stoltenberg accused Russia of “saber-rattling.”

This nuclear sabre-rattling of Russia is unjustified. It’s destabilizing and it’s dangerous. This is something which we are addressing, and it’s also one of the reasons we are now increasing the readiness and preparedness of our forces,” Stoltenberg said during a news briefing in Brussels on Tuesday.

He added that NATO is making sure it “provides the terms of protection of all allies against the enemy.”

NATO forces are currently holding military exercises in Poland codenamed Noble Jump. Their aim, according to Stoltenberg’s interview to the Polish Press Agency, is to show that the Alliance can quickly deploy its forces to any of the member countries.

READ MORE: Putin: 40+ ICBMs targeted for 2015 nuclear force boost

The drills involve about 2,000 soldiers and some 500 pieces of hardware, including tanks, jets and helicopters. The scenario is based on a hypothetical conflict with several countries taking part. It is the first official exercise of the NATO ‘Spearhead’ force established in Europe to counter what Alliance commanders have repeatedly dubbed ‘Russian aggression’.

Washington also made a statement following Vladimir Putin’s announcement about additional ICBMs.

“It does concern me,” State Secretary John Kerry said, answering a reporter’s question at a briefing. “Nobody should hear that kind of announcement from the leader of a powerful country and not be concerned about what the implications are.”

‘US, EU fails to put enough pressure on Kiev to implement Minsk deal’

Putin made the fresh statements at a media press conference with Finland’s President Sauli Niinisto in Moscow on Tuesday evening. Besides NATO, the two leaders talked much about the on-going crisis in Ukraine and Russia’s role in its resolution.

Putin said Moscow considers the Minsk ceasefire agreement to be ‘fair and balanced’ and criticized the US and EU for failing to make enough effort to pressure Kiev.

We consider [the Minsk] agreements to be fair and balanced and we are exerting the possible pressure on one of the sides of the conflict – on the unrecognized Donetsk and Lugansk republics,” Putin said The eastern Ukrainian republics are ready to hold talks on all points of the Minsk agreement, he said.

Putin noted that “none of the points of the [Minsk deal] are sole responsibility of Donbass, primarily it’s the responsibility of Kiev authorities.”

He also criticized the EU and the US leaders for failing to exercise “enough pressure on Kiev authorities” in the implementation of the ceasefire agreement. There is “no alternative” to the Minsk deal and “as hard as it may be we should follow this path,” he said.

The sides of the conflict “should sit down for direct talks” as there is “no other way,” he added.

Niinisto, in his turn, said that Moscow and Helsinki were actively participating in the OSCE work and pledged that the work would continue.

At present, everybody should exert maximum efforts to restore peace in Ukraine and remove the current strains that are present in Russia’s relations with the West,” he said.

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Obama: G7 to discuss ‘Russian aggression in Ukraine’

by on Jun.07, 2015, under News Events

Obama: G7 to discuss ‘Russian aggression in Ukraine’

9 hours ago

President Obama has said the leaders of the G7 nations will discuss “standing up to Russian aggression in Ukraine”.

Speaking at a news conference in Bavaria with the German Chancellor, Angela Merkel, he also joked that he had forgotten his lederhosen.

He said the two-day summit would discuss a range of issues including the global economy, violent extremism and climate change.

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