Tag Archives: Debt

Illinois’ unpaid bills reach record $14.3 billion

FILE PHOTO - Bruce Rauner talks to the media after a meeting with Barack Obama at the White House in Washington December 5, 2014. REUTERS/Larry Downing/File Photo

By Karen Pierog and Dave McKinney

CHICAGO (Reuters) – Illinois’ unpaid bill backlog has hit a record high of $14.3 billion as the legislature nears a May 31 budget deadline, the state comptroller’s office said on Wednesday.

The bill pile jumped from $13.3 billion after the governor’s budget office this week reported more than $1 billion in liabilities held at state agencies, the comptroller said.

Illinois is limping toward the June 30 end of its second straight fiscal year without a complete budget due to an impasse between Republican Governor Bruce Rauner and Democrats who control the legislature.

“It’s clear the Rauner Administration has been holding bills at state agencies in an attempt to mask some of the damage caused by the governor’s failure to fulfill his constitutional duty and present a balanced budget,” Comptroller Susana Mendoza, a Democrat, said in a statement, adding that the governor’s office was keeping lawmakers in the dark about the true size of the backlog.

Eleni Demertzis, Rauner’s spokeswoman, said instead of the “same tired partisan attacks,” Mendoza should be talking “to her party leaders about working with Republicans to pass a budget that is truly balanced and job-creating changes that will grow our economy.”

Lawmakers face a May 31 deadline to pass budget bills with simple-majority votes. The Senate on Wednesday passed pieces of a long-awaited package to stabilize state finances, including for the current and upcoming fiscal years, authorization to borrow $7 billion to pay down the bill backlog and an overhaul to state pensions.

But the House-bound legislation faces an unclear future. The Senate defeated legislation to implement the budget bill, putting its fate in doubt, while Rauner remains another question mark.

He has conditioned his support of a budget on passage of changes to workers compensation laws and a long-term freeze on property taxes. A bill for a two-year local property tax freeze fell four votes shy in the Senate, leaving a significant opening for the governor to reject the entire Democratic-crafted spending package.

The busy legislative day also included Senate passage of a gambling-expansion bill authorizing a Chicago-owned casino and a school funding revamp that allocates $215 million to help Chicago’s cash-strapped schools pay teacher pensions this year.

Rauner’s office rejected the school bill, but did not immediately comment on the other legislation.

Illinois’ reliance on continuing appropriations, court-ordered spending and partial budgets has caused the unpaid bill backlog to balloon from $9.1 billion at the end of fiscal 2016.

(Editing by Meredith Mazzilli and Matthew Lewis)

Italy’s Renzi says August quake caused at least 4 billion euros of damage

Italian Prime Minister Renzi addresses the United Nations General Assembly in the Manhattan borough of New York

ROME, Sept 23 (Reuters) – An earthquake that killed 297 people in central Italy last month caused damage worth at least 4 billion euros ($4.5 billion), Prime Minister Matteo Renzi said on Friday.

Renzi, who is looking for as much fiscal leeway as possible from the European Commission as he prepares his 2017 budget, has said he expects earthquake-related costs to be excluded from the EU’s budget deficit limits.

However, he has remained vague on whether those costs should include only the immediate aid and reconstruction effort for the towns affected, or also costs related to a broader project to make Italy’s buildings more earthquake-resistant.

“We are looking at a minimum of 4 billion euros ($4.48 billion),” Renzi told reporters on Friday in his first estimate of the extent of the damage in the mountain towns hit by the Aug. 24 quake.

He said all money spent on making Italy’s schools earthquake proof would be excluded from EU’s Stability Pact which sets deficit ceilings for the bloc’s members. It remains to be seen whether the EU Commission will agree with this approach.

The government, which will publish new economic forecasts next week, is expected to sharply raise its target for the 2017 budget deficit from the current goal of 1.8 percent of gross domestic product.

Brussels says it has granted Italy “unprecedented” budget flexibility in recent years and is concerned about Rome’s inability to bring down its public debt, the highest in the euro zone after Greece’s as a percentage of GDP.

Renzi has insisted that the EU’S fiscal rules should be relaxed, and has attacked his fellow leaders for failing to
acknowledge that austerity policies have been counter productive.

European Commission President Jean-Claude Juncker said on Thursday Rome had already been given 19 billion euros of “flexibility” in its 2016 budget, in comments widely interpreted in Italy as a signal he may be reluctant to grant much more leeway for next year. ($1 = 0.8919 euros)

(Reporting By Gavin Jones; Editing by Toby Chopra)

U.S. household debt rises to $12.29 trillion in Q2

(Reuters) – U.S. household debt hit $12.29 trillion in the second quarter, up $434 billion from a year earlier as auto loans and credit card debt increased, a Federal Reserve Bank of New York survey showed on Tuesday.

Some 4.8 percent of the outstanding debt was in some stage of delinquency, down from 5.6 percent from a year ago, according to the quarterly household debt and credit report.

Auto debt was $1.10 trillion, up $97 billion from a year earlier, while the aggregate credit card limit increased for the 14th straight quarter, reflecting Americans’ easier access to credit as the 2007-2009 financial crisis fades.

Mortgage debt was $8.36 trillion, up $246 billion from last year, while student loan debt was $1.26 trillion, up $69 billion.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

Millennials face debt – and denial

A food delivery-man rides a bicycle up 9th Avenue as snow continues to fall

By Bobbi Rebell

NEW YORK (Reuters) – Debt may be a drag for millennials, but apparently not as much as cooking their own dinner.

A survey from Citizens Bank found that fewer than half (47 percent) of millennials, those in the 18-35 age group, who are college graduates would be willing to limit their online food delivery in return for reducing their student loans.

Other priorities? Concerts, sporting events and lattes, as well as travel and vacations.

The prospect of limiting any of these luxuries got the “no thanks” from the majority of millennials who were asked if they would cut back to lower their student loans. The same holds true for cutting Internet service.

Despite being so unwilling to give up life’s little pleasures, more than half (57 percent) said they regret taking out as many student loans as they did, and about a third said they would not have even gone to college if they knew how much it was going to cost them.

That is a big conflict, says Brendan Coughlin, president of consumer lending at Citizens Bank. “They are very committed to living their life the way they want to live their life, and as frustrated as they are by student loans, they are not willing to make those lifestyle tradeoffs,” he said.

Part of the problem may be one of denial and math. The same survey found that nearly half of millennials (45 percent) with student loans do not even know how much of their annual salary they spend on them. It is 18 percent on average, for the record.

On the upside, the vast majority do at least know what they owe – over $40,000 for most. But more than a third (37 percent) are clueless on the interest rate they pay.

Some suggestions for getting that number down:

KNOW WHAT YOU OWE

The National Student Loan Data System tracks federal loans (www.nslds.ed.gov or 1-800-4-FED-AID). For private student loans, borrowers should check out their annual credit reports (www.annualcreditreport.com).

REFINANCE

Three-quarters of millennial graduates told Citizens Bank that refinancing is not part of their plan to pay off their student loans. Millennials who have graduated and have jobs often qualify for better rates than they did when they had no income at the start of school.

In addition to Citizens Bank, SoFi, CommonBond, Wells Fargo, Earnest and other institutions offer refinancing programs. There is also an opportunity for students to moved from variable-rate loans to fixed-rate ones as a hedge against rising interest rates.

At Citizens, a regular undergraduate loan ranges from 5.25 percent to 11.75 percent. Refinancing loans start as low as 4.74 percent. Variable rates range from 2.44 percent to 9.44 percent. On average, a customer will save 1.5 percent APR when refinancing, or $147 a month, according to Citizens.

GET HELP AT WORK

A number of companies, including Fidelity and PwC, are offering help to pay down student debt. This is becoming a more mainstream perk and is worth looking into with your current employer – and keeping in mind if you are looking for a job.

While only about 3 percent of employers are offering this perk, according to the Society for Human Resource Management, it is gaining steam as companies work to attract and retain millennial workers.

SEEK FORGIVENESS

Some professions, such as public service jobs, offer student loan forgiveness. They include public defenders, law enforcement officers, doctors, nurses and some teachers.

For example, teachers who work in low-income school districts and teach certain needed subjects may qualify for even full cancellation of some types of loans.

Volunteering can also pay off. Many organizations like the Peace Corps and AmeriCorps offer eligibility for student loan payments through Public Service Loan Forgiveness (PSLF) or other options.

(Editing by Beth Pinsker and Dan Grebler)

Euro zone, IMF split over how much Greece needs to reform

By Jan Strupczewski

BRUSSELS (Reuters) – Euro zone lenders and the International Monetary Fund disagree over how much more Greece needs to do to reform its economy, a dispute that may delay new payouts and the start of debt relief talks, officials said.

Greece has been kept afloat since 2010 by IMF and euro zone bailouts. The lenders have disagreed in the past, but they have managed to resolve their issues before they got much publicity.

But after Athens had to ask for a third bailout last year, some in the IMF wanted to stay out of yet another program unless they were sure it would get Greece back on its feet.

“The main problem now is disagreement between the institutions, because that will harm the credibility of any solution,” one senior official said. “They must get their act together and agree on a scenario and on policy measures.”

IMF and euro zone officials hope to reach a compromise on Greece in talks this week, before a meeting of euro zone finance ministers on Monday. Senior officials from both sides are to meet for dinner on Wednesday in Brussels to discuss the issue.

Until the euro zone and the IMF agree, they cannot decide if Greece has met the first requirements for the payout of new loans. Nor can the euro zone start discussions with Athens on debt relief that would help make Greece’s huge debt sustainable.

Greece has no major debt redemptions due until July, giving the lenders and Athens time to find a compromise. But the drawn- out talks undermine investor confidence.

“If we now enter a cycle of whether this review will be concluded or not, it will generate the kind of insecurity we more or less had last year … with the loss of confidence and capital flight,” a third official close to the lenders said.

The dispute focuses on what Greece has to do to reach a 3.5 percent primary surplus in 2018 and keep it there so that it no longer has to borrow from the euro zone to remain solvent.

Officials said the IMF had a more cautious outlook than euro zone institutions on Greek economic growth and fiscal performance, as experience showed Athens underperformed targets.

The IMF believes Greece’s primary surplus in 2018 will be around 2 percent with the current reforms. Growth will be about a percentage point lower than forecast by the euro zone. Greece should therefore be more ambitious with reforms, especially with the most politically difficult, pension reform.

REFORMS NOT ENOUGH

Yet Greece’s commitments are spelled out in a memorandum of understanding (MoU) it signed with the euro zone in August. It says the pension reform will deliver savings of 1 percent of gross domestic product in 2016.

The draft reform prepared by Athens does that, but Greece also understood the deal from August a bit differently.

“In summer we promised to do 1 pct GDP of extra measures to be legislated in 2016 but to be implemented in 2017 and 2018. The IMF is asking for even more measures than this, which is very difficult for us to understand,” Greek Finance Minister Euclid Tsakalotos told a hearing in the European Parliament.

“We feel that we have already compromised. I don’t think we have to make a greater compromise … because we are at the end of a recession and … we have already had 11 cuts,” he said.

The IMF was involved in talks on the memorandum, but did not sign off on it and is not formally part of the bailout. It says the numbers don’t add up.

“To reach its ambitious medium-term target for the primary surplus of 3.5 percent of GDP, Greece will need to take measures in the order of some 4-5 percent of GDP,” the IMF’s head of the European department, Poul Thomsen, wrote on Feb 11. “We cannot see how Greece can do so without major savings on pensions.”

The pension reform could be less ambitious and the 2018 primary surplus lower if the euro zone offered Greece greater debt relief, Thomsen said.

That would irk some in the euro zone who have to maintain similar surpluses to keep debt sustainable or who, like the Baltics or Slovakia, find it difficult to justify Greeks getting bigger pensions than their own citizens.

“We should do what we promised in the summer, and the IMF should pressure the EU to make that sustainable (with more debt relief),” Tsakalotos told European parliamentarians.

Another snag is that the IMF wants debt relief to solve the issue once and for all. The euro zone wants a staggered scheme, linked to conditions over time.

While the IMF is not formally part of the third bailout, the euro zone would very much like it to be. But the Fund will not join unless their views align.

The approval of the IMF is also a must for northern European countries like Germany, Austria or Finland, which believe the European Commission is too lenient towards Greece and too optimistic with forecasts.

(Reporting By Jan Strupczewski, additional reporting by Paul Taylor and Francesco Guarascio in Brussels, Gernot Heller in Berlin, editing by Larry King)

Puerto Rico Governor Says Country Can’t Pay Debt

While much of the world was focused on Greece and a potential default that could cause ripples throughout the European economy, another nation has announced they will be unable to pay their bills.

Puerto Rico governor Alejandro Garcia Padilla told the New York Times that the country’s economy was close to a “death spiral” and that it cannot pay the $72 billion it owes creditors.

“The debt is not payable,” García Padilla said. “There is no other option. I would love to have an easier option. This is not politics, this is math.”

“My administration is doing everything not to default,” García Padilla added. “But we have to make the economy grow,” he added. “If not, we will be in a death spiral.”

The self-governing U.S. commonwealth has been in a recession since 2006.

Gracia Padilla said that unless creditors come to the table and “share the sacrifices” made by the citizens of the country, it could be bad.

“If they don’t come to the table, it will be bad for them,” he told the Times.  “What will happen is that our economy will get into a worse situation and we’ll have less money to pay them. They will be shooting themselves in the foot.”

Because Puerto Rico is a territory and not a state, it cannot file for bankruptcy in the same manner that Detroit, Michigan did in 2013.

Croatia Dissolves All Debt For Poor

Poor residents of Croatia is going to breathe easier on Monday when the government cancels all debt.

The move by the government is aimed to “kickstart the nation’s economy”

Any citizen earning under $184 U.S. dollars a month, rent their property and unable to pay off debts will get up to $5,146 wiped away.  Power companies, loan brokers, banks and phone companies are part of the businesses that will have to swallow the losses.

“We are doing all we can to make people’s lives easier in this protracted and strenuous crisis and give them a chance for a fresh start,” Prime Minister Zoran Milanovic said in a press conference.

Officials estimate that 60,000 Croatians will be receiving debt relief under the plan.  The action will cost creditors as much as $309 million U.S. according to estimates.

Croatia has been suffering from a massive recession for seven years.

Spain and Italy Warned Over Budget Plans

The European Commission is warning the Spanish and Italian governments that their draft budgets for 2014 do not comply with new debt and deficit rules. The Commission also said that France and the Netherlands barely qualified for the new standards.

According to the European Union’s charter, countries that do not comply will likely have to revise their tax and spending plans before they can be submitted to national parliaments. The warning marks the first time the EC has taken this step.

Eurozone members states are required to cut deficits until they reach a balanced budget. They also have to reduce levels of public debt. The Commission usually gives countries flexibility if their deficit is below the EU ceiling of 3% of the nation’s gross domestic product.

The Commission said that France, while just below the 3% threshold, was making only “limited progress” in reforms.

The Eurozone economy grew by .1% from July to September in data released Thursday, down from .3% growth in the previous quarter.