Tolstoy famously remarked that all happy families are alike but each unhappy family is unhappy in its own way. The same might be said of the unhappy state of the Greek and Puerto Rican economies. But while both those economies are struggling with very high debt burdens within a monetary union, there are very big differences between the two that makes it difficult to tar them with the same brush. Indeed, on closer inspection, it would seem that though the Puerto Rican economic crisis might be serious, it is of a very much lesser dimension than that in Greece.
Both Greece and Puerto Rico have very high public debt levels in relation to that of their peers. However, the scale of Greece’s indebtedness dwarfs that of Puerto Rico. Whereas Greece’s public debt has now reached around $350 billion, or 180 percent of its gross domestic product (GDP), that of Puerto Rico totals $72 billion, or around 70 percent of its GDP. Another basic difference between the two economies is that whereas Greece’s debt is now mainly in official hands, Puerto Rico’s debt is mainly held by private-sector asset managers. In principle, this makes Puerto Rico’s debt more susceptible to restructuring than that in the Greek case.
Both Greece and Puerto Rico constitute a very small part of the monetary union to which they belong. Indeed, the Greek economy constitutes less than 2 percent of the overall eurozone’s economy, while that of Puerto Rico constitutes a very much smaller part of the overall U.S. economy. However, while Greece might constitute a small part of the European economy, it has the potential to cause contagion to much larger economies in the European economic periphery, like Italy and Spain. By contrast, Puerto Rico would seem to have little potential to cause contagion to the United States.
Full text of this article can be found at TheHill.com.
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