From the ancestral lands of Pericles and sage invincible Socrates we hear disturbing news. The old cradle of democracy and Olympism travels road to bankruptcy. It seems it could be a matter of days, unless Greece manage to reach an agreement with the International Monetary Fund (IMF) and the European Central Bank (ECB). Athens now living moments of great tension and uncertainty, perhaps comparable to the Nazi invasion of 1941 and the military coup in 1967 that led to the expulsion of the Greek royal house.
In recent days I have heard voices in Puerto Rico unfounded taking comfort from the Greek crisis, arguing that if things are bad here, there are worse and still survive. Nothing is further from reality. Puerto Ricans what we have to understand is that our crisis is even more pernicious than the Greek because our room for maneuver and revive our economy is much more limited, while lack of alternative sources of liquidity at a time when the Government Development Bank Fomento Aboca, within weeks, technical default (“technical default”).
Both in Puerto Rico and Greece the immediate trigger for the crisis is the lack of liquidity and the imminence of a whole series maturity debt payments.
In the case of Greece, where public debt amounted to 323,000 million euros (equivalent to 175% of GNP), not later than June 30, Greece is obliged to return the IMF 1,590 million and refinance additional 5,200 million euros. While in July, Greece will have to make payments of 3,500 million euros to the ECB, 465 million euros from the IMF and 2,000 million euros to additional creditors.
However Greece, whose sovereign bonds were downgraded by Moody’s this past April 29 to Caa2 rating (same scale to which they were demoted on May 21 the general obligation bonds of Puerto Rico), has two powerful weapons in its arsenal with which Puerto Rico does not have. The first of these is a game of 7,200 million euros (from the IMF and ECB) that is ready to be immediately injected into the banking system as soon as the new government of Alexis Tsipras will pave the austerity requirements of the Union European.
The second is the nuclear option, which is nothing but threaten to leave the euro zone if it does not reach a satisfactory agreement for the Greek people. And both Angela Merkel, Francois Hollande, and the rest of the political leadership of the remaining 16 euroestados know very well that the defection of Greece would lead to economic collapse of the European Union (at least in the short term). Hence the bargaining power of Greece with the “troika” of creditors that lurks: the International Monetary Fund, the European Central Bank and the European Union. That is the Mollero lacks Puerto Rico.
Neither IVU enlarged or video lottery or the transfer of $ 100 million from the State Insurance Fund to the General Fund or the GDB deposit of about $ 1.900 million in public funds are in private banking, get us out of the hole.
With a broken BGF, a billionaire deficit marked a decline in revenues and the economy in free fall, here it was time to be pragmatic. It was time to implement a strategy of selective default in the payment of any debt that has no constitutional protection; particularly when markets already see this possibility and for over a year trading at less than 84 cents on the dollar our bonds.
Of the $ 72.204 million that Puerto Rico should only $ 18.566 million are constitutionally protected by the full faith and credit of the Commonwealth. (Quarterly Report, p.56) The rest of the debt must be restructured and capital is now allocated to payment of principal and interest on that $ 53.638 million who lack constitutional protection must be reinvested in reviving our ailing economy.
What were first people or creditors first?
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