The Greek economy has collapsed. Over the past five years, its GDP shrank by 25%. Youth unemployment stands at 60%.
As of yesterday, June 29, it closed all its banks for one week.
Today, June 30, it defaulted on an €1.55 billion ($1.73 billion) payment to the International Monetary Fund (IMF).
It also imposed a nationwide restriction on ATM withdrawals, with a strict limit of 60 euros ($67) per day. Across the entire country, thousands of senior citizens swarmed their local bank branches, demanding their weekly government checks. They were all turned away.
Seniors shut out of an Alpha Bank branch in Thessaloniki, Greece
Greece is imploding. Politics and self-interest took priority over sound management, until it was too late…and now the same thing, at the same moment, is happening in Puerto Rico.
The island owes a public debt of $73 billion. Over the past year, Wall Street demoted this debt to “junk bond” status. The government is now teetering on bankruptcy and raising taxes in every direction. A new 11.5% sales tax goes into effect tomorrow (July 1), gasoline taxes were raised twice last year, and utility rates – electricity and water – have skyrocketed in each of the island’s 78 municipalities.
This “public debt” is really a public scandal. A great deal of waste, nepotism and corruption exists in the government of Puerto Rico, regardless of who is governor. Everybody knows it. This “quitate tu pa’ ponerme yo” politics, with everyone (including the police department) stuffing their pockets, has played perfectly into the hands of Wall Street…which played a game of “three-card monte” on the entire island.
Over the past five years, the Big Three rating services on Wall Street – Fitch, Moody’s, Dun & Bradstreet – all warned Puerto Rico to “get your act in order.” If this “order” was not established, the rating services would give Puerto Rico the lowest possible credit rating: Junk Bond status.
And so, in 2010, the government of Puerto Rico dutifully laid off 33,000 workers. In 2013, it raised corporate tax rates to 39% and hiked the water rates by 60%:
Also in 2013, islanders paid double the average electricity costs of the rest of the US, at 29 cents per kilowatt:
The government also raised the retirement age, demanded higher worker contributions, and lowered government pensions and benefits:
On July 1, 2015, the government now adds an 11.5% sales tax.
It even proposed a tax on every fat child in Puerto Rico.
Now get ready, for the three-card monte:
Despite all these fiscal austerities…despite raising taxes, reducing pensions, and laying off 33,000 workers…despite doing everything that Wall Street asked… the government of Puerto Rico had its debt demoted to “Junk Bond” status.
The three rating services pulled a last-minute three card monte trick on Puerto Rico, and kicked the island’s credit rating into the gutter. Because of this, the public debt of $73 billion will translate into a per capita debt $20,278, and a debt of $168,471 for every person in the workforce – when you add interest payments and other debt service costs.
This “Junk Bond” status – a bait and switch tactic by the three rating services – is the latest Wall Street hustle. It is the latest US tax on Puerto Rico.
It will be paid by every Puerto Rican on the island. It is part of the reason that so many Puerto Ricans are leaving the island.
Governor Garcia Padilla may also be playing “three-card monte” with the people of Puerto Rico. His televised speech on June 29, 2015, called for “shared sacrifice” from all Puerto Ricans, and “concessions” from the island’s creditors. This all sounds wonderful but – especially in politics – the devil is in the details.
Towards the end of the speech, he mentioned the possibilities of “service cutbacks,” “public-private partnerships,” and an “oversight board.” With those words, he planted the seeds for a de facto Financial Control Board, and an invasion of foreign investment of the worst sort: predatory lending.
Here is how.
The Governor’s speech is just that…a speech. But its policy underpinnings, the specific goals and objectives behind that speech, are laid out in great detail in this document: The Krueger Report on Puerto Rico.
Here is the Krueger Report:
This report is very dangerous.
On page 17, it recommends ending the minimum wage in Puerto Rico, or a reduction to 1/3 of the $7.25 federal standard: in other words, a minimum wage of $2.42 per hour. It also recommends a cut in overtime, vacation and bonus pay, and “relaxing labor laws for youth/new entrants for the first few years.”
On that same page 17, the report recommends a cut in Medicaid, federal welfare payments, and federal housing benefits.
Page 20 recommends a property tax hike, and lowering the number of teachers in Puerto Rico.
Page 22 recommends the establishment of an “Oversight Board” from “inside and outside the Commonwealth,” with “special powers to enforce approved budgets.”
If this is where we are headed…then George Orwell is alive and well in Puerto Rico, and Governor Garcia Padilla is Big Brother. With a freshly scrubbed face, sincere gaze, and a mellow voice, he talks to us about our children, and a brighter future for Puerto Rico…and it’s all political doublespeak.
The Krueger Report is a pogrom: a systematic plan for evicting the people of Puerto Rico from their own island. No minimum wage, child labor, scarce federal benefits, property tax hikes, fewer teachers, and an “Oversight Board” with people from “outside” the island, with “special powers” to make sure that it all happens.
With supernatural accuracy, the Krueger Report has a perfect title. Freddy Krueger, the movie villain, killed people while they slept. If Puerto Rico goes to sleep, this Krueger Report will kill them.
Collectively, the three co-authors of the Krueger Report worked for the International Fund (IMF) for 63 years. Anne Krueger was an IMF deputy managing director, and the chief economist for the World Bank. One of her co-authors, Mr. Ranjit Teja, is currently the Deputy Director of the IMF European Department.
In Europe, the economy of Greece is falling part because today, June 30, Greece failed to make a loan repayment of €1.55 billion ($1.73 billion) to the IMF.
In other words the same financial organization, and the same exact people (i.e., Mr. Ranjit Teja) that are throwing the Greek economy into the toilet, are the ones that wrote Gov. Garcia Padilla’s “financial plan” for Puerto Rico!
On what planet does Gov. Garcia Padilla live? Does he have a Swiss bank account somewhere? Surely there must be an explanation, for unleashing Freddy Krueger in Puerto Rico.
Once Freddy finishes with Greece, he’ll be feasting on Puerto Rico.