Puerto Rico facing historic default on its $72 billion debt

Puerto Rico is just days away from a historic economic collapse after the commonwealth’s governor said the island cannot pay its $72 billion in debts.

Gov. Alejandro García Padilla, who took office two years ago, told Puerto Ricans during a televised address Monday that his government’s attempts to slash expenditures and restructure its debt have failed. He said an analysis by former World Bank and International Monetary Fund officials showed the “harsh reality” of the economic situation.

“Our public debt…is unpayable,” he said. “The report states even if we increased taxes and cut back spending, the magnitude of the problem is such, because of the weight of the debt we carry, that it would solve nothing.”

White House spokesman Josh Earnest said Monday that the Treasury Department has already been providing guidance to the island’s government and that an interagency task force would help identify existing federal funds that it could benefit from. But he said the administration was not considering any kind of bailout for the island of 3.5 million people.

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

The inability of the U.S. territory to repay its debt, combined with the financial crisis in Greece, would have far-reaching implications for financial markets and unsuspecting American investors.

Puerto Rico, which became a territory of the United States in 1898 after a war with Spain, cannot legally file for bankruptcy, as American cities like Detroit have done when faced with similar fiscal crises. The island’s constitution, however, states that Puerto Rico must make its debt payments before it pays for any other government services, leaving the island in a fiscal limbo if it cannot make its payments.

More From USA Today: