RACHEL MARTIN, HOST:
That's the debt crisis in the Mediterranean. Closer to home in the Caribbean, Puerto Rico is facing a fiscal crisis of its own. After years of borrowing to cover budget shortfalls, the U.S. territory is more than $72 billion in debt and faces some important deadlines tomorrow. The governor there, Alejandro Garcia Padilla, gave a televised address last night. In it, he warned residents that there would have to be sacrifices, and some of them would have to be borne by creditors. The governor is proposing a multi-year moratorium on debt payments.
NPR's Greg Allen joins us now from San Juan, Puerto Rico. Greg, today, Puerto Rico's bonds fell in value for the second day in a row, the first following an interview in which the governor called Puerto Rico's debt, quote, "unpayable." Is the governor threatening to default at this point?
GREG ALLEN, BYLINE: Well, bondholders might disagree, Rachel. But officials here say definitely not. They say - what they're asking is in the best interest not just of Puerto Rico but also the bondholders and the hedge funds that hold Puerto Rico's debt. What Puerto Rico wants is better terms from its lenders, even, as the governor said last night, a moratorium on debt payments for a couple of years until the island can get its economy going again. I spoke today to a representative from the governor's party, Rep. Luis Vega Ramos. He's - he compared Puerto Rico to a family that's had a setback and can no longer pay their home mortgage. Here's what he had to say.
LUIS VEGA RAMOS: That family does what Puerto Rico needs to do now. They put their best suit and tie. They go to the bank, and they say to the bank people, we've never missed a mortgage payment. We cannot pay you as it is right now. So in one pocket, I have my checkbook, and I can structure a new way of paying you. Or in the other pocket, I have the keys to the house.
MARTIN: OK, but is there any reason to believe that lenders in Puerto Rico want the keys to the house?
ALLEN: I don't think they do. Lenders really just want their money. The main thing Puerto Rico has going for it at this point is that lenders - they don't want assets like the island's troubled power company. So the lenders are at the table negotiating, but something like a multi-year moratorium on debt payments that the governor's asked for - that might be a bit of a stretch.
MARTIN: Puerto Rico has to make some big debt payments tomorrow. What are people saying? Does it have the money?
ALLEN: Well, clearly they have some. Puerto Rico's reported to have paid off a $700 million short-term loan to a group of banks today. The head of the government bank has said they will have the cash to make a big debt payment tomorrow on general obligation bonds. But there's other things going - out there. The island power company has a big payment due tomorrow and Puerto Rico officials have been doing last-minute negotiations with bondholders in that deal. It looks like they might have a deal where the power company pays much of what it owes and is able to postpone paying back part of the debt while negotiations continue there.
MARTIN: You're there in San Juan, Greg. What's it feel like walking around the city for average workers? What does it feel like to them?
ALLEN: Well, you know, it seems like a crisis to me because the way we report it. Then you get here, and you realize that things have been so bad for so long that I think for most people here, it's just another day. In the governor's address last night, he talked about pain and shared sacrifice. And we'll have to see what that means because in the past, when there's been big layoffs of government workers, cuts to education spending - things that did cause pain - there were big protests in the streets. So we won't know until probably August or later. The governor's appointed a working group to work something out with lenders, and we'll see what they come up with and whether big spending cuts are going to be part of that picture.
MARTIN: NPR's Greg Allen in San Juan, Puerto Rico. Thanks so much, Greg.
ALLEN: You're welcome.
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