The U.S. Treasury Department on Thursday warned of a potential government shutdown in Puerto Rico and lengthy litigation if Congress doesn’t approve a debt restructuring plan for the U.S. territory soon.
Antonio Weiss, counselor to the U.S. Treasury secretary, issued the warning as House Republicans held hearings in Washington during a final push to address the island’s failing economy.
Weiss said he supports a plan that would temporarily suspend litigation to prevent a shutdown of basic government services on the U.S. territory and give time for voluntary negotiations with debt holders.
The plan also would create a voting mechanism to prevent a handful of officials from blocking a reasonable compromise, he said during a hearing by the House Committee on Natural Resources, which expects to file a bill to address Puerto Rico’s economic crisis. If debt negotiations fail, a court-supervised structure would ensure what Weiss called an orderly resolution.
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He also said that an independent federal oversight board is needed if a debt restructuring plan is approved.
“There is no room for error in this economy,” he said. “The government remains open only because the governor authorized more than $1 billion in onerous and unsustainable emergency liquidity actions.”
Puerto Rico has struggled with a financial crisis for nearly a decade and faces a $72 billion public debt load that the governor has said is unpayable and needs restructuring.
U.S. House Speaker Paul Ryan has pledged action by end of March, although some legislators remain reluctant, noting that Puerto Rico has not released long-delayed audited financial statements.
“Congress is flying blind,” Rep. Jeff Duncan, a South Carolina Republican, said during the hearing. “I don’t believe we should take any action.”
The hearings were held on the same day the White House announced it would speed up access to nearly $400 million for public works projects in Puerto Rico to help spur economic development.