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    Puerto Rico Gov. Alejandro García Padilla on Monday portrayed his territory’s economic condition as even more dire than previously revealed and in a televised address appealed to Washington to make unprecedented, “concrete” changes in bankruptcy rules to help rescue the island’s finances.Groaning under at least $73 billion in debt, Puerto Rico — which is being called “America’s Greece” — is staggering down a path toward default, a scenario that could ripple across cities and states that depend on bonds for building everything from schools to stadiums.“This is not about politics,” García Padilla said. “It’s about math.”The territory’s plight is also a potentially explosive issue in Washington, where congressional Republicans mostly oppose any step that would allow Puerto Rico to seek bankruptcy protection to restructure its debts and clean up its fiscal mess. Meanwhile, the White House has offered only modest assistance in the roughly three years of crisis talks and has avoided taking any position on whether Puerto Rico could resort to bankruptcy for itself or its government-owned corporations. With pressure mounting to avoid a default by the Puerto Rican government, White House spokesman Josh Earnest for the first time Monday urged Congress to “take a look at” whether to give the territory’s financially strapped government-owned corporations — most importantly its electric utility — the option of bankruptcy protection to restructure their budget and debts. “We cannot permit that they force us to choose between paying our police, our teachers, our nurses or paying the debt,” García Padilla said.[Markets fall as twin defaults loom in Greece, Puerto Rico] States and Puerto Rico are barred from seeking bankruptcy protection, but cities and other municipalities can. Chapter 9 of the bankruptcy code allows a company or municipality to get new financing from markets while continuing to function as old debts are restructured or written down. It was used recently by Detroit, for example. The Treasury Department issued a cautious statement saying only that it supported a “long-term economic and fiscal plan,” “a sustainable path” and “an agenda for economic revitalization.” It said it would “continue to share its expertise with the local officials.” “That’s great, but it’s not addressing the fundamental issue,” said one person involved in negotiations between Puerto Rico and its creditors, speaking on the condition of anonymity to preserve working relationships. “The right answer, if you were a rational policymaker looking at a territory you acquired in 1898, would be to give a federal judge supervision through extending Chapter 9, and then Puerto Rico would have access to financial markets again,” the person said. Earnest said the Transportation Department recently “identified” $750 million in credits from toll roads that should go to Puerto Rico, but a source familiar with the program said the money would be spent over decades. Earnest also cited the Energy Department, which has helped identify ways the Puerto Rican electric utility, which burns oil, could save money and lower rates, but it does not have funds to help the costly conversion to cheaper fuels. The need for radical restructuring is growing as Puerto Rico’s economy shrinks and obligations grow. A report co-written by Anne Krueger, a former No. 2 official at the International Monetary Fund, said that the territory’s finances are in worse shape than believed previously. The report, issued Monday, said deficits run up by 150 agencies and $300 million to $400 million of capital expenditures annually were among “missing items” that understated the island’s true budget deficit. The government also failed to count boxes of unpaid invoices for school supplies.“For many years we have acted on this fiction that we have all these state-owned enterprises that are legally independent and financially self-sustaining,” said Sergio Marxuach, general counsel at the Center for a New Economy in San Juan. “Financially, they depend on the central government for all sorts of subsidies and loans.”The report also noted that the government had also failed to make tough decisions, noting for example that over the past decade the number of students in school fell by 40 percent as people moved to the mainland United States, while the number of teachers rose 10 percent, giving Puerto Rico one of the highest teacher-to-student ratios in the country. Hundreds of school buildings needed to be closed, the report said.The Krueger report also said that large portions of the workforce were not seeking employment, because government benefits amounted to more than what a worker could earn at the minimum wage. She wrote that 40 percent of the adult population works or is looking for work, compared with 63 percent on the mainland. The rest are idle or working in the underground economy. Earnest said that “there are strong merits to having an orderly mechanism for Puerto Rico to manage the financial challenges of its public corporations if needed.” Puerto Rico’s public corporations, including the electric and water utilities, have about $10 billion of the island’s total debt. An Obama administration official said later that the island had municipalities that could be considered for bankruptcy if they needed it. Many congressional Republicans say bankruptcy protection would amount to a federal bailout, but proponents of using Chapter 9 say it would require no federal funds. Puerto Rico bonds, unlike those of any other state or municipality, are not taxable at federal, state or municipal levels in every state in the country. That has made the bonds highly sought after and widely held by bond funds; it has also lowered borrowing costs for Puerto Rico. Opposition to giving Puerto Rico the bankruptcy option has come mostly from the biggest holders of Puerto Rico debt: OppenheimerFunds and Franklin Templeton, each with about $5 billion of bonds issued by Puerto Rico or its government-owned corporations, such as the electric and water utilities. Bond insurers MBIA (MBI) and Assured Guaranty (AGO) are ultimately responsible for similar amounts, negotiators say. The share prices of MBIA (MBI) and Assured Guaranty (AGO) plunged 23.5 and 13.35 percent respectively on Monday. National Public Finance Guarantee Corp., an MBIA (MBI) subsidiary that insures more than $4 billion in Puerto Rico bonds, “will continue to work with the appropriate parties toward a solution that addresses Puerto Rico’s significant fiscal and operational difficulties while respecting the rights of creditors,” a company spokesman said. Major hedge funds that have bought Puerto Rico bonds at deep discounts, hoping to make large profits if Puerto Rico ends up paying full face value, are also lobbying Congress to block the bankruptcy option. Sources close to the negotiations between Puerto Rico and Congress say that those hedge funds include Fir Tree, Blue Mountain, Monarch, Stone Lion and Knighthead. Some market watchers say investors should have recognized that investing in the island, whose per-capita debt load far outstrips that of any state in the union, was a dubious risk. Despite that, “the governor’s statements that the commonwealth’s debts are ‘unpayable,’ will likely come as a surprise to many . . . bondholders who have willfully ignored the inevitability of a painful debt restructuring,” said a report from Municipal Market Advisers, a firm that tracks the municipal bond market.On Monday, Fitch further downgraded Puerto Rico bonds, and prices for the island’s 20-year commonwealth bond fell 11 percent, driving the yield to 12.2 percent. The problems in Puerto Rico raised concern that the island’s crisis could harm the larger market for municipal bonds. But some analysts, noting that Puerto Rico’s debt problems are far more severe per capita than those of any state, disagreed.“The commonwealth’s reckless use of debt-financed budgets is, in its breadth and depth, unique among U.S. municipal issuers,” said the note from Municipal Market Advisers, which concluded that “fears of a credit contagion from Puerto Rico are “unfounded.”Jonelle Marte and Max Ehrenfreund contributed to this report.






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    Puerto Rico Gov. Alejandro García Padilla on Monday portrayed his territory’s economic condition as even more dire than previously revealed and in a televised address appealed to Washington to make unprecedented, “concrete” changes in bankruptcy rules to help rescue the island’s finances.Groaning under at least $73 billion in debt, Puerto Rico — which is being called “America’s Greece” — is staggering down a path toward default, a scenario that could ripple across cities and states that depend on bonds for building everything from schools to stadiums.“This is not about politics,” García Padilla said. “It’s about math.”The territory’s plight is also a potentially explosive issue in Washington, where congressional Republicans mostly oppose any step that would allow Puerto Rico to seek bankruptcy protection to restructure its debts and clean up its fiscal mess. Meanwhile, the White House has offered only modest assistance in the roughly three years of crisis talks and has avoided taking any position on whether Puerto Rico could resort to bankruptcy for itself or its government-owned corporations. With pressure mounting to avoid a default by the Puerto Rican government, White House spokesman Josh Earnest for the first time Monday urged Congress to “take a look at” whether to give the territory’s financially strapped government-owned corporations — most importantly its electric utility — the option of bankruptcy protection to restructure their budget and debts. “We cannot permit that they force us to choose between paying our police, our teachers, our nurses or paying the debt,” García Padilla said.[Markets fall as twin defaults loom in Greece, Puerto Rico]States and Puerto Rico are barred from seeking bankruptcy protection, but cities and other municipalities can. Chapter 9 of the bankruptcy code allows a company or municipality to get new financing from markets while continuing to function as old debts are restructured or written down. It was used recently by Detroit, for example. The Treasury Department issued a cautious statement saying only that it supported a “long-term economic and fiscal plan,” “a sustainable path” and “an agenda for economic revitalization.” It said it would “continue to share its expertise with the local officials.” “That’s great, but it’s not addressing the fundamental issue,” said one person involved in negotiations between Puerto Rico and its creditors, speaking on the condition of anonymity to preserve working relationships. “The right answer, if you were a rational policymaker looking at a territory you acquired in 1898, would be to give a federal judge supervision through extending Chapter 9, and then Puerto Rico would have access to financial markets again,” the person said. Earnest said the Transportation Department recently “identified” $750 million in credits from toll roads that should go to Puerto Rico, but a source familiar with the program said the money would be spent over decades. Earnest also cited the Energy Department, which has helped identify ways the Puerto Rican electric utility, which burns oil, could save money and lower rates, but it does not have funds to help the costly conversion to cheaper fuels. The need for radical restructuring is growing as Puerto Rico’s economy shrinks and obligations grow. A report co-written by Anne Krueger, a former No. 2 official at the International Monetary Fund, said that the territory’s finances are in worse shape than believed previously. The report, issued Monday, said deficits run up by 150 agencies and $300 million to $400 million of capital expenditures annually were among “missing items” that understated the island’s true budget deficit. The government also failed to count boxes of unpaid invoices for school supplies.“For many years we have acted on this fiction that we have all these state-owned enterprises that are legally independent and financially self-sustaining,” said Sergio Marxuach, general counsel at the Center for a New Economy in San Juan. “Financially, they depend on the central government for all sorts of subsidies and loans.”The report also noted that the government had also failed to make tough decisions, noting for example that over the past decade the number of students in school fell by 40 percent as people moved to the mainland United States, while the number of teachers rose 10 percent, giving Puerto Rico one of the highest teacher-to-student ratios in the country. Hundreds of school buildings needed to be closed, the report said.The Krueger report also said that large portions of the workforce were not seeking employment, because government benefits amounted to more than what a worker could earn at the minimum wage. She wrote that 40 percent of the adult population works or is looking for work, compared with 63 percent on the mainland. The rest are idle or working in the underground economy. Earnest said that “there are strong merits to having an orderly mechanism for Puerto Rico to manage the financial challenges of its public corporations if needed.” Puerto Rico’s public corporations, including the electric and water utilities, have about $10 billion of the island’s total debt. An Obama administration official said later that the island had municipalities that could be considered for bankruptcy if they needed it. Many congressional Republicans say bankruptcy protection would amount to a federal bailout, but proponents of using Chapter 9 say it would require no federal funds. Puerto Rico bonds, unlike those of any other state or municipality, are not taxable at federal, state or municipal levels in every state in the country. That has made the bonds highly sought after and widely held by bond funds; it has also lowered borrowing costs for Puerto Rico. Opposition to giving Puerto Rico the bankruptcy option has come mostly from the biggest holders of Puerto Rico debt: OppenheimerFunds and Franklin Templeton, each with about $5 billion of bonds issued by Puerto Rico or its government-owned corporations, such as the electric and water utilities. Bond insurers MBIA (MBI) and Assured Guaranty (AGO) are ultimately responsible for similar amounts, negotiators say. The share prices of MBIA (MBI) and Assured Guaranty (AGO) plunged 23.5 and 13.35 percent respectively on Monday. National Public Finance Guarantee Corp., an MBIA (MBI) subsidiary that insures more than $4 billion in Puerto Rico bonds, “will continue to work with the appropriate parties toward a solution that addresses Puerto Rico’s significant fiscal and operational difficulties while respecting the rights of creditors,” a company spokesman said. Major hedge funds that have bought Puerto Rico bonds at deep discounts, hoping to make large profits if Puerto Rico ends up paying full face value, are also lobbying Congress to block the bankruptcy option. Sources close to the negotiations between Puerto Rico and Congress say that those hedge funds include Fir Tree, Blue Mountain, Monarch, Stone Lion and Knighthead. Some market watchers say investors should have recognized that investing in the island, whose per-capita debt load far outstrips that of any state in the union, was a dubious risk. Despite that, “the governor’s statements that the commonwealth’s debts are ‘unpayable,’ will likely come as a surprise to many . . . bondholders who have willfully ignored the inevitability of a painful debt restructuring,” said a report from Municipal Market Advisers, a firm that tracks the municipal bond market.On Monday, Fitch further downgraded Puerto Rico bonds, and prices for the island’s 20-year commonwealth bond fell 11 percent, driving the yield to 12.2 percent. The problems in Puerto Rico raised concern that the island’s crisis could harm the larger market for municipal bonds. But some analysts, noting that Puerto Rico’s debt problems are far more severe per capita than those of any state, disagreed.“The commonwealth’s reckless use of debt-financed budgets is, in its breadth and depth, unique among U.S. municipal issuers,” said the note from Municipal Market Advisers, which concluded that “fears of a credit contagion from Puerto Rico are “unfounded.”Jonnelle Marte and Max Ehrenfreund contributed to this report.




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    The governor of Puerto Rico said in a televised address Monday that the island cannot pay back more than $70 billion in debt, setting up an unprecedented financial crisis that could rock the municipal bond market and lead to higher borrowing costs for governments across the United States.“This is not about politics,” said Puerto Rico’s governor, Alejandro Garcia Padilla. “It’s about math.”Garcia Padilla said the country needed to postpone for several years its debt payments.“The first step is to revive economic growth...We will never get out of this vicious cycle,” said Garcia Padilla. “But we need to do more—much more—to return to riches and to become more competitive and have an expansion in the private market.”Garcia Padilla proposed creating a committee that would work together to create reforms to the country, but he said “sacrifices should be shared,” adding that he welcomed “creditors who want to cooperate.”Puerto Rico’s move could roil financial markets already dealing with the turmoil of the renewed debt crisis in Greece. It also raises questions about the once-staid municipal bond market, which states and cities count on to pay upfront costs for public improvements such as roads, parks and hospitals.[Puerto Rico, with at least $70 billion in debt, confronts a rising economic misery]For many years, those bonds were considered safe investments — but those assumptions have been shifting in recent years as a small but steady string of U.S. municipalities, including Detroit, as well as Stockton and Vallejo in California, have tumbled into bankruptcy.Those defaults at least offered investors the protection provided by Chapter 9 of the U.S. bankruptcy code, which sets out an orderly process by which investors can recoup at least some of their money. But like states, Puerto Rico is not permitted to file for bankruptcy. A failure to iron out an agreement with creditors could ignite an unwieldy, uncharted and long-lasting process to sort out the island’s financial obligations.In addition, with as much as $73 billion in debt, the island’s debt obligation is four times that of Detroit, which became the largest U.S. city to file for bankruptcy in 2012. The implications are serious for Americans outside Puerto Rico largely because many hold island bonds in mutual funds. At one point in 2013, an estimated three out of four municipal bond mutual funds held Puerto Rican bonds, which were attractive because of their high yields and exemption from federal, state and local taxes.Garcia Padilla will seek concessions from creditors, which range from mutual funds in the United States to large hedge funds that have been buying Puerto Rican debt at high interest rates, in an effort to stretch out loan payments and drive down borrowing costs that are hamstringing Puerto Rico’s struggling economy.[Can bankruptcy save Puerto Rico’s state-run corporations?]On Monday, the governor and Puerto Rico’s government development bank released a report analyzing the island’s finances written by former World Bank chief economist and former deputy director of the International Monetary Fund Anne Krueger and economists Ranjit Teja and Andrew Wolfe.“The report...for the first time acknowledges the true extent of the problem,” said Garcia Padilla in a statement Monday. “We must make difficult decisions to meet the challenges we now know are ahead, and I intend to do everything in my power to lead us through this time.”The government’s conclusion that it is unable to pay its debts was first reported by the New York Times (NYT). “It’s accurate,” said Gabriela Melendez, a Washington-based spokeswoman for the Puerto Rican government. “My administration is doing everything not to default,” Garcia Padilla said in an interview with the New York Times (NYT). “But we have to make the economy grow. If not, we will be in a death spiral.”A U.S. commonwealth with a population of 3.6 million, Puerto Rico carries more debt per capita than any state in the country. The island has been staggering under the increasing weight of those obligations for years as its economy has tanked, triggering an exodus of island residents to the mainland not seen since the 1950s.Meanwhile, the government has raised taxes, cut government employment and slashed pensions in a futile effort to get its debt burden under control. Those actions have only slowed the acceleration of debt creation, while harming efforts to reignite the economy.The financial crisis in Puerto Rico has been playing out for years, although until now the government has been able to keep things moving by cutting spending and borrowing more and more money on Wall Street. But with rating agencies downgrading Puerto Rican debt to near-junk levels, the island has had to pay high rates to borrow money.“What will happen is that our economy will get into a worse situation and we’ll have less money to pay them,” the governor said in the New York Times (NYT) interview. “They will be shooting themselves in the foot.”The island’s web of debt includes general-obligation bonds, which Puerto Rico’s constitution says must be repaid even before government workers receive their pay. But billions of dollars more in bonds were floated by public corporations that provide critical services on the island, including providing electric power, building roads and running water and sewer authorities. Beyond the bond debt, the island owes some $37 billion in pension obligations to workers and former workers.Puerto Rico has been pushing for Congress to grant bankruptcy protection for its public corporations, but that legislation has gone nowhere.Jonnelle Marte contributed to this report.




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    Greece appeared likely to default on its debt Tuesday, sending financial policymakers in ­Europe and the United States scrambling to ensure that the turmoil in Athens does not escalate into a broader financial panic.U.S. stocks faced their worst day of the year Monday, with the Dow Jones industrial average plunging 350 points. It was part of a sell-off that spanned three continents after negotiations between Greece and its creditors broke down over the weekend and Athens closed the nation’s banks. The country is facing a required debt payment of 1.6 billion euros ($1.7 billion) to the International Monetary Fund, but Greek officials said Monday there was no way they could come up with the money.Meanwhile, Puerto Rico became the front of a new crisis, with Gov. Alejandro García Padilla saying in a televised address Monday evening that the island could not pay back at least $73 billion in debt. García Padilla said he would seek a deal with lenders and urged Congress to pass an unprecedented law allowing the U.S. territory to file for bankruptcy — something the White House for the first time encouraged lawmakers to consider.[What the crisis in Greece means for the U.S. recovery ]The prospect of twin defaults in Greece and Puerto Rico highlighted the fragilities that still threaten the global financial system. Although the initial fallout seemed contained on Monday, some analysts said the crisis reveals that economies are more vulnerable to shocks than they appear.“These things don’t happen when global economies are accelerating,” said Steven Ricchiuto, chief economist at Mizuho Securities. “These things tend to boil over to the surface when global economies are underperforming.”Greece has until 6 p.m. Eastern time Tuesday to make the IMF payment, and there is always a chance that an eleventh-hour deal could be struck. But, while analysts said Greece and Europe might ultimately come to an accord without much more financial damage, it seemed highly unlikely that would happen by the deadline.President Obama and Treasury Secretary Jack Lew lobbied European and Greek officials over the weekend and into Monday to urge them to find an agreement that keeps Greece on track to meet its obligations and preserves its place in the euro zone. White House press secretary Josh Earnest said Monday that although the situation “does not pose a major direct risk” to the American banking system, it is important that the European economy stay strong.“Robust growth and economic stability in Europe is clearly within the U.S. economic interest but also in our national security interest, as well,” he said.Earnest also said the administration is not considering a federal bailout of Puerto Rico. But the White House is asking Congress to look at creating a mechanism for the island to declare bankruptcy, similar to one used by cities and other municipalities, officially known as Chapter 9 bankruptcy.Economists say that regardless of what happens, Greece and Puerto Rico face a grim outlook. Greece is already back in recession, and residents of Puerto Rico are leaving the island in droves. Their economies are small — Greece’s is about the same size as Connecticut’s — but the global financial crisis in 2008 was a lesson in how relatively small pockets of instability can rock the entire world.[Four ways to end the Greek crisis, from Obama’s former top economist]The debt crisis erupted as Europe was just starting to emerge from a double-dip recession. The 19 countries that have adopted the euro as their currency logged the strongest growth in two years during the first quarter. Particularly encouraging was the healthy showing in fragile countries such as France and Italy. Meanwhile, economists were predicting more rapid growth for the United States amid robust hiring and rapidly falling unemployment.But the turmoil in Greece and Puerto Rico threatens to interrupt that progress. At the very least, it is a sign that the world economy remains exposed.The clearest sign of that weakness came Monday in the form of a swift negative reaction from global financial markets. At its close Monday, the Standard & Poor’s 500-stock index was down 43.85 points, or 2.1 percent, to 2057.64. Earlier, Germany’s DAX dropped 3.6 percent. The trouble began overnight in China, which has already been experiencing a stock market correction after a historic boom this year. The tech-heavy Shanghai Composite Index fell nearly 140 points, or 3.4 percent, to 4053. The market is now officially in bear territory.Beyond that, there were no major disruptions. But the worst-case scenario is what analysts call “contagion.” A Greek default could force the country to leave the European Union and drop out of the 19-member euro zone. That could send investors into a frenzy, pulling money out of not only Greece but other fragile economies.A rapid outflow of capital could in turn destabilize countries such as Spain and Italy. If that was to happen, a tidal wave of panic could wash over Europe and spill over into the United States. A flight to safety could push up the U.S. dollar, crimping exports and dampening the American recovery.But European officials and many economists say that possibility is slim. Greece technically defaulted on its debt in 2012, leading to a massive restructuring of its payment program. Since then, vulnerable countries have shored up their economies and investors know what to expect, said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics.“Greece in some ways was the last war, and they’re well prepared to fight the last war,” he said.As Greece neared darkness Monday, creditors and its leaders were poised to keep talking about whether there was any way to pull back from the brink of economic collapse amid anger and recriminations on both sides.Greece’s European partners and international lenders say further cutbacks are needed to maintain the financial lifeline that has kept the country afloat for years. Greece’s government — elected on its anti-austerity pledges — has stood firm in opposing politically sensitive measures such as further slashing pensions.Greek Prime Minister Alexis Tsipras stunned the world over the weekend by announcing that he would hold a referendum this Sunday on whether his nation should accept the austerity terms of its creditors. He has been campaigning for a no vote and suggested Monday that Europe had boxed Greece into an impossible situation. “Having asphyxiated banks & denied extension request,” he tweeted Monday, “is it reasonable to expect that IMF installment will be paid tomorrow?”But many other Greeks believe it is better to accept the cutbacks demanded by Greece’s creditors and remain in the euro zone. A yes vote would effectively be a rejection of Tsipras and could set off new elections.“We’re urging you to reject it with all our strength,” Tsipras told a late-night television interviewer Monday, saying that the costs to other euro-zone countries were far too high to kick Greece off the currency. “The bigger the percentage of noes, the bigger the weapon of the Greek government to relaunch the negotiations.”The gathering crisis in Greece will test the firewalls put in place by European policymakers to prevent a broader financial meltdown. The country has shut down its banks and limited customer withdrawals to the equivalent of just $66 a day. Greek debt is not widely held, limiting global exposure. The country’s main creditors are the IMF, the European Central Bank and other euro-area countries.In addition, central banks have developed new tools to stimulate weak economies and stabilize financial systems. ECB President Mario Draghi unleashed a massive stimulus program this year and has vowed to do “whatever it takes” to keep a single currency.Greece amounts to just 1.8 percent of the euro-area economy, and the United States’ direct exposure to Athens is limited. Greece accounts for less than 1 percent of all U.S. trade, much of it in vegetables.“What we’re seeing today — a decline in U.S. stocks, but one that in magnitude does not go beyond the kind of day-to-day movements we’ve seen all year — pretty accurately reflects the way the [European Union] meetings went this past weekend: ending badly, but in a way that was not entirely unexpected,” Peter Ireland, an economics professor at Boston College, said in an e-mail. “These events aren’t enough to derail the ongoing U.S. recovery.”Birnbaum reported from Athens. Michael A. Fletcher and Jonnelle Marte in Washington contributed to this report.




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    Nervous about a tired bull market, rising bond yields and a potential Greek exit? He said his company's three new alternative exchange-traded funds "run anywhere between 50% net long to 75% net long so right off the bat you have muted exposure to the marketplace which is where you want to be in this type of uncertain market," said Powell.

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    U.S. stock markets fell sharply on Monday after a global sell-off as investors grew increasingly skittish over the prospects of twin debt defaults by Greece and Puerto Rico.Greece appeared likely to miss a critical debt payment to the International Monetary Fund on Tuesday as negotiations over unlocking additional aid from its European creditors broke...

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    began the holiday-shortened week with sharp declines on Monday, as global equity markets were hit by the unraveling crisis in Greece. The country's Prime Minister Alexis Tsipras unexpectedly called for a referendum on whether to accept reform measures demanded by the country's lenders. The S&P 500 opened 18 points, or 0.9%, lower at 2,082. The Dow Jones Industrial Average dropped 160 points, or 0.9%, to 17,784. The Nasdaq Composite began the day down 61 points, or 1.2% at 5,019..

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    U.S. stock-index futures were quoted significantly lower early Monday, pricing in an increased likelihood that Greece could default on its debts after Athens announced a referendum on the nation's bailout terms. About 12 hours ahead of the open of U.S. markets, futures for the S&P 500 were off 1.6%, while quotes for the CBT eMini Dow Jones Industrial Average futures and eMini Nasdaq 100 futures were down 1.4% and 1.5%, respectively. Still, the trio were off their earlier lows and...

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    suffered its biggest decline in more than a year, while Dow industrials saw the largest one-day point drop in more than two years as investors dumped risky assets such as stocks as the crisis unraveled in Greece. The country's Prime Minister Alexis Tsipras unexpectedly called for a referendum on whether to accept reform measures demanded by the country's lenders. The S&P 500 dropped 43.85 points, or 2.1%, to 2,057.64 and turned negative for the year.

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    Humana (HUM) shares closed trading down 1.33% to $192.90 on heavy volume Monday following reports that the Department of Justice would keep a close eye on any potential mergers in the healthcare sector, according to the Wall Street Journal.Aetna made an official bid for Humana last week, though terms of the deal were not disclosed, according to Bloomberg sources. Humana (HUM) has also received a merger off...

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    * TSX ends down 317.94 points, or 2.15 percent, at 14,490.15. * All 10 main groups fall at least 1 pct, banks weigh heaviest. * Fall is sharpest one-day loss since first days of 2015. By Alastair Sharp.

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     Cigna (CI) shares closed trading down 2.02% to $164.67 on Monday following reports that the Justice Department will be closely scrutinizing potential health service sector mergers, according to the Wall Street Journal.Last week Anthem made public a $47.5 billion bid for Cigna (CI) amid a flurry of other rumored mergers and acquisition among the top five health insurers in the country.A senior DOJ offici...

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    Shares of American Capital were gaining 2.1% to $13.82 after-hours on Monday after the asset manager announced it repurchased about 6.5 million shares in the second quarter. American Capital said it repurchased the shares at an average price of $14.32 a share for a total of about $92.6 million.

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    Treasury yields tumbled Monday, recording their largest one-day yield decline since November 2011, as the latest escalation in the Greek saga, with the introduction of capital controls and an upcoming referendum, fueled flight-to-safety flows into U.S. The buying rally in Treasurys started in Asian markets and continued in New York, as investors braced for heightened volatility in a holiday-shortened week that will end with the closely watched U.S. jobs report on Thursday.

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    The governor of Puerto Rico said in a televised address Monday that the island cannot pay back more than $70 billion in debt, setting up an unprecedented financial crisis that could rock the municipal bond market and lead to higher borrowing costs for governments across the United States.“This is not about politics,” said Puerto Rico’s governor, Alejandro Garcia Padilla. “It’s about math.”Garcia Padilla said the country needed to postpone for several years its debt payments.“The first step is to revive economic growth...We will never get out of this vicious cycle,” said Garcia Padilla. “But we need to do more—much more—to return to riches and to become more competitive and have an expansion in the private market.”Garcia Padilla proposed creating a committee that would work together to create reforms to the country, but he said “sacrifices should be shared,” adding that he welcomed “creditors who want to cooperate.”Puerto Rico’s move could roil financial markets already dealing with the turmoil of the renewed debt crisis in Greece. It also raises questions about the once-staid municipal bond market, which states and cities count on to pay upfront costs for public improvements such as roads, parks and hospitals.[Puerto Rico, with at least $70 billion in debt, confronts a rising economic misery]For many years, those bonds were considered safe investments — but those assumptions have been shifting in recent years as a small but steady string of U.S. municipalities, including Detroit, as well as Stockton and Vallejo in California, have tumbled into bankruptcy.Those defaults at least offered investors the protection provided by Chapter 9 of the U.S. bankruptcy code, which sets out an orderly process by which investors can recoup at least some of their money. But like states, Puerto Rico is not permitted to file for bankruptcy. A failure to iron out an agreement with creditors could ignite an unwieldy, uncharted and long-lasting process to sort out the island’s financial obligations.In addition, with as much as $73 billion in debt, the island’s debt obligation is four times that of Detroit, which became the largest U.S. city to file for bankruptcy in 2012. The implications are serious for Americans outside Puerto Rico largely because many hold island bonds in mutual funds. At one point in 2013, an estimated three out of four municipal bond mutual funds held Puerto Rican bonds, which were attractive because of their high yields and exemption from federal, state and local taxes.Garcia Padilla will seek concessions from creditors, which range from mutual funds in the United States to large hedge funds that have been buying Puerto Rican debt at high interest rates, in an effort to stretch out loan payments and drive down borrowing costs that are hamstringing Puerto Rico’s struggling economy.[Can bankruptcy save Puerto Rico’s state-run corporations?]On Monday, the governor and Puerto Rico’s government development bank released a report analyzing the island’s finances written by former World Bank chief economist and former deputy director of the International Monetary Fund Anne Krueger and economists Ranjit Teja and Andrew Wolfe.“The report...for the first time acknowledges the true extent of the problem,” said Garcia Padilla in a statement Monday. “We must make difficult decisions to meet the challenges we now know are ahead, and I intend to do everything in my power to lead us through this time.”The government’s conclusion that it is unable to pay its debts was first reported by the New York Times (NYT). “It’s accurate,” said Gabriela Melendez, a Washington-based spokeswoman for the Puerto Rican government. “My administration is doing everything not to default,” Garcia Padilla said in an interview with the New York Times (NYT). “But we have to make the economy grow. If not, we will be in a death spiral.”A U.S. commonwealth with a population of 3.6 million, Puerto Rico carries more debt per capita than any state in the country. The island has been staggering under the increasing weight of those obligations for years as its economy has tanked, triggering an exodus of island residents to the mainland not seen since the 1950s.Meanwhile, the government has raised taxes, cut government employment and slashed pensions in a futile effort to get its debt burden under control. Those actions have only slowed the acceleration of debt creation, while harming efforts to reignite the economy.The financial crisis in Puerto Rico has been playing out for years, although until now the government has been able to keep things moving by cutting spending and borrowing more and more money on Wall Street. But with rating agencies downgrading Puerto Rican debt to near-junk levels, the island has had to pay high rates to borrow money.“What will happen is that our economy will get into a worse situation and we’ll have less money to pay them,” the governor said in the New York Times (NYT) interview. “They will be shooting themselves in the foot.”The island’s web of debt includes general-obligation bonds, which Puerto Rico’s constitution says must be repaid even before government workers receive their pay. But billions of dollars more in bonds were floated by public corporations that provide critical services on the island, including providing electric power, building roads and running water and sewer authorities. Beyond the bond debt, the island owes some $37 billion in pension obligations to workers and former workers.Puerto Rico has been pushing for Congress to grant bankruptcy protection for its public corporations, but that legislation has gone nowhere.Jonnelle Marte contributed to this report.