Lessons from Puerto Rico Should Encourage Brexit

Executive Summary

·         Puerto Rico has been an unincorporated territory of the US since 1898, after being ceded by the Spanish in the Treaty of Paris to end the Spanish-American war.

·         Current fiscal snapshot:

o   Approximately the size of Connecticut, Puerto Rico has 3.5 million inhabitants, down from 3.8 million in 2000 due to persistent and accelerating outmigration to the US mainland. Population has decreased by 6% over the past decade while total government expenditures have increased by 29% (from $15.2bn in 2004 to $19.6bn in 2013).

o   Education expenditures increased 39% (from $3.5bn in 2004 to $4.8bn in 2013) while total school enrollment declined by ~25%.

o   GDP for 2015 was reported to be $103 billion - slightly smaller than that of Kansas. The economy has been contracting since 2006.

o   The labor force participation rate is 40% (one of the world’s lowest), compared to 63% in the US, with an unemployment rate of 12.2%. Public sector employment accounts for 28% of Puerto Rico’s labor base, versus 15% on the US mainland.

o   Direct US federal transfers account for 43% of Puerto Rico’s governmental revenues.

·         Debt crisis:

o   Puerto Rico has accumulated $72 billion in government debt (doubling over the past 10 years), greater than any US state except NY and CA, with a debt-to-GDP ratio of 70%.

o   At the end of FY2014, Puerto Rico’s three main public pension funds had net assets of only $2bn against a combined estimated pension liability of $46bn; an incredibly weak 4.3% funding ratio, compared to a median US pension funding status of 68.6%.

o   In February 2014, Puerto Rico’s credit rating for general obligation bonds was lowered to non-investment grade by all three major credit rating agencies.

o   Puerto Rico first defaulted on a $58 million debt payment on August 3, 2015. There have been several more defaults since then. A $2 billion payment is due July 1, 2016, of which $805 million is on its general obligation (GO) bonds. GO bonds are guaranteed under Puerto Rico’s constitution to be paid before anything else.

·          Legal issues:

o   In 1984 Puerto Rico and the District of Columbia were excluded from allowing their municipalities to declare bankruptcy. Being able to declare bankruptcy allows a person, corporation or municipality various options for negotiating with creditors, restructuring debt and in some circumstances reducing principal and interest payments (e.g. cramming down debtholders) outright.

o   Puerto Rico’s general obligation bonds were sold with the highest level of debtholder protection in that they are guaranteed under Puerto Rico’s Constitution to be paid ahead of all other creditors. Furthermore, no other collective active clauses or provisional debt restructuring options were included in the bond indentures, which would have increased the interest rate on the bonds due to the increased risk to creditors.

o   Puerto Rico’s government and various Administration officials and Congressmen would now like to retroactively change the contract law and cram down the debtholders – primarily based on an argument that the debt is heavily owned by distressed debt hedge funds and these wealthy investors are opportunistic and therefore not worthy of pursuing their legal rights in court.


 Implications for Brexit:

      I don’t pretend to understand the complexity of the arguments and emotions surrounding Britain’s upcoming vote to exit the EU. But if I were a British citizen watching the US grapple with Puerto Rico’s imminent default and potential bailout of a “not quite sovereign” nation, largely due to gross fiscal mismanagement and conflicting federal law which exacerbated the fiscal distress – I would be deeply concerned about where the EU is headed.  First with Greece, then potentially Portugal, Italy and probably France following in those footsteps of restructuring and/or default due to a non-competitive economy and irresponsibly promised benefits that cannot possibly be sustained. 

Early History and a Nascent Move Towards Sovereignty

The Ortoiroids are thought to have been the first human inhabitants of Puerto Rico. Originally from South America, they migrated across the Caribbean and began settling on the island between 3,000 and 2,000 BC. Other tribes, such as the Saladoid and Arawak Indians, followed; but by 1,000 AD the Taino people and culture – whose roots trace to Venezuela – dominated. By the time of Columbus’ arrival on November 19^th, 1493, there were 30,000 to 60,000 Taino Amerindians inhabiting the island.

Spanish warfare – including slavery and conquest of the indigenous people - and colonization of Puerto Rico began almost immediately, with a massacre in 1503 and the first Spanish settlement established by Ponce de Leon in 1508. Exposure to diseases brought by settlers, slavery and probable deliberate extermination by the Spanish resulted in the Taino people being all but wiped out on the island within a few decades.

Despite repeated attacks by the British, French and Dutch over the next three centuries, the Spanish maintained colonial rule and economic control over the island. A wave of immigration from western Europe in the early 1800s, combined with persistent but unsuccessful slave revolts, built political momentum among factions of the island’s inhabitants – by then numbering nearly 600,000 - for Puerto Rican independence in the latter half of the 1800s.

The struggle for sovereignty was unexpectedly subsumed by the military and strategic goals of the United States, whose Navy acted to expand its power and defensive positions in the Caribbean. The Spanish-American war “broke out” (that is, the US military moved to seize Spanish colonies in the Atlantic – Puerto Rico and Cuba – and in the Pacific – Guam and the Philippines) in April of 1898. The war was short-lived.

Excerpted from Wikipedia article, History of Puerto Rico.

On August 12, 1898 peace protocols were signed in Washington and Spanish Commissions met in San Juan on September 9 to discuss the details of the withdrawal of Spanish troops and the cession of the island to the United States. On October 1, an initial meeting was held in Paris to draft the Peace Treaty and on December 10, 1898, the Treaty of Paris was signed (ratified by the US Senate February 6, 1899). Spain renounced all claim to Cuba, ceded Guam and Puerto Rico and its dependent islets to the United States, and transferred sovereignty over the Philippines to the United States and in turn was paid $20,000,000 ($570 million in 2016 dollars) by the U.S.

Unconventional Legal Status

Puerto Rico was one of the three territories (along with Guam and the Philippines) that was ceded to the US by the Spanish in 1898 via the Treaty of Paris after the Spanish-American war. Once the US acquired ownership of, or sovereignty over, the territories, they needed to establish a legal doctrine for governance. Excerpts (slightly paraphrased) from Wikipedia articles, The Political Status of Puerto Rico and Insular Cases (formatting and emphasis added):

The Insular Cases are a series of opinions by the U.S. Supreme Court from 1901-1905, about the status of U.S. territories acquired in the Spanish–American War. The Supreme Court held that full constitutional rights do not automatically (or ex proprio vigore—i.e., of its own force) extend to all places under American control. This meant that inhabitants of unincorporated territories such as Puerto Rico—"even if they are U.S. citizens"—may lack some constitutional rights (e.g., the right to remain part of the United States in case of de-annexation).

The Court also established the doctrine of territorial incorporation, under which the Constitution applied fully only in incorporated territories such as Alaska and Hawaii, whereas it applied only partially in the newly unincorporated Puerto Rico, Guam and the Philippines.

The term "insular" signifies that the territories were islands administered by the War Department's Bureau of Insular Affairs.

Downes v. Bidwell (1901) is considered the leading Insular case. It concluded that the United States could acquire territory and exercise unrestricted power in determining what rights to concede to its inhabitants. The case created the constitutionally unprecedented category of "unincorporated territories".

A 1922 Supreme Court ruling explained the distinction between an incorporated and a non-incorporated territory this way, "an unincorporated territory is a territory as to which, when acquired by the United States, no clear intention was expressed that it would eventually be incorporated into the Union as a State".

In the wake of the Spanish-American war, the legal status of Puerto Rico was established, and currently remains, as an unincorporated territory of the United States.

But what does that mean, exactly?

With absolutely no attempt to be comprehensive, the following are a few salient features of

the unincorporated territory of Puerto Rico (condensed, edited and interpreted) from a 2011 Congressional Research Service report on the Political Status of Puerto Rico - Options for Congress and an excellent 2016 paper by Carlos Rodriguez Vidal, Esq. presented at an April 2016 meeting of the American Bar Association, titled,  A Tale of Two "Municipalities" (Detroit and Puerto Rico): Legal and Practical Issues Facing a Financially Distressed Municipality:

Ø  Established by the Jones-Shaforth Act of 1917 (aka the Jones Act), residents of Puerto Rico hold statutory, but not constitutional, US citizenship. As such, certain fundamental rights, but not all constitutional rights, extend to citizens of the territories.

Ø  The Jones Act recognized a bill of rights for the territory, established Executive, Judicial and Legislative branches of government, and granted US citizenship to residents of Puerto Rico (just in time for them to be drafted into military service during WWI). Estimates are that 236,000 inhabitants of Puerto Rico registered for the WWI draft and 18,000 served in the US military during the war.

Ø  The Territorial Clause of the US Constitution (Article IV, Section 3, clause 2) grants Congress broad authority over territories.

“The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or

other Property belonging to the United States; and nothing in this Constitution shall be so construed as to Prejudice any Claims of the United States, or of any particular State.” U.S. Const., Art. IV, Sec. 3, cl. 2.

“A major issue early in the 20th century was whether the whole Constitution applied to the territories called insular areas by Congress. In a series of opinions by the Supreme Court of the United States, referred to as the Insular Cases, the Court ruled that territories belonged to, but were not part of the United States. Therefore, under the Territorial clause Congress had the power to determine which parts of the Constitution applied to the territories. These rulings have helped shape public opinion among Puerto Ricans during the ongoing debate over the commonwealth's political status.”  -- Wiki article on, Article Four of the US Constitution

Ø  In 1950, in what was termed “an act in the nature of a compact” between Puerto Rico and the United States, the US Congress allowed the People of Puerto Rico to organize a government pursuant to a constitution of their own adoption. Puerto Rico ratified its own constitution in 1952, and officially became the Commonwealth of Puerto Rico. Under the Constitution, Puerto Rico elects its own governor and legislature, and can enact its own legislation, as long as it does not conflict with federal law.

Ø  The territory and residents are subject to federal laws, with some exceptions carved out by Congress.

Ø  Puerto Ricans pay federal income tax on income derived from sources in the mainland US, but they pay no federal income tax on income earned in Puerto Rico.

Ø  Residents can vote in presidential primaries but cannot vote in presidential elections. (I have no idea why, either. Possibly because they pay no federal income taxes. See below.)

Ø  Puerto Rico has an elected Representative that serves in the House but cannot vote on legislation outside of committees. (I believe this is similar to the Representative for the District of Columbia.)

What does any of this have to do with Puerto Rican debt?

Ø  The Jones Act also exempted Puerto Rican bonds from federal, state and local taxes, regardless of where the bond holder resides. Most state and municipal debt is tax exempt only for residents of that state or municipality.

Ø  The Constitution included an Article V, section 8, on the priority of disbursements when resources are insufficient. From Vidal (emphasis added):

The section provides that when available resources in a fiscal year are insufficient to cover the approved expenditures for that year, payment of interest and amortization of public debt shall be paid first, and then other disbursements shall be paid in the order of priority established by law. The Puerto Rico Office of Management and Budget enabling statute provides the guidelines for such disbursements:

(1) Order the payment of interest and amortizations corresponding to the public debt.

(2) Order that the commitments entered into by virtue of legal contracts in force, judgments of the courts in cases of condemnation under eminent domain, and binding obligations to safeguard the credit, reputation and good name of the

Government of the Commonwealth of Puerto Rico, be attended to.

(3) Order that preference be given to disbursements charged to appropriations for regular expenses connected with the:

(A) Conservation of public health.

(B) Protection of persons and property.

(C) Public education programs.

(D) Public welfare programs.

(E) Payment of employer contributions to retirement systems and payment of pensions to individuals granted under special statutes; and then, the remaining public services in the order of priority determined by the Governor; Provided, That the disbursements related to the services listed hereunder shall not have preference among themselves but shall be handled simultaneously; Provided, further, That any adjustments due to reductions may be made in any of the appropriations for regular expenses, including the service areas indicated in this subparagraph.

(4) Order the construction of capital works or improvements with duly executed contracts; Provided, That priority shall be given to emergency works caused by catastrophes or acts of nature, acts of God; and then, to those works that are most

responsive to the development of the normal and economic life of Puerto Rico.

(5) Order that the payment of contracts and commitments contracted under special appropriations for operations be honored, and then, that special preference be given to those phases of the programs that are in the process of development

or in a stage of planning which, if postponed, would affect the interests of the clients served by the program, directly or indirectly.

Ø  Notably, in 1984, the ability for the territories of Puerto Rico and the District of Columbia to allow their municipalities to declare bankruptcy under Chapter 9 (formerly the Municipal Bankruptcy Act, passed in 1934) of the federal bankruptcy code was specifically pre-empted by Congress in a technical amendment to the 1978 revision of the federal Bankruptcy Code.*

There is no legislative history regarding the rationale of why municipalities in the territories of Puerto Rico and the District of Columbia were suddenly denied the ability to file for bankruptcy under Chapter 9 per the 1984 amendment, when they were capable of doing so under the 1934 Act. It is also unknown who inserted the language into the bill. Some claim that it was a goof, or inserted by a rogue staffer. It was possibly a pre-emptive swipe at the territories, given they were both already deeply in debt compared to the states, and exhibiting little fiscal restraint even by the late 70s. For one review of the possible reasons, see this December 2015 Bloomberg article, Congress Goofs, Puerto Rico Pays.

*Legal sidebar: There is not (and never has been) a federal bankruptcy chapter that allows US states to file for bankruptcy and restructure their debt. Much of Puerto Rico’s debt was issued by their municipal utilities, but the utilities are controlled by the Commonwealth so it is public debt. Thus the recent appeal to the Supreme Court to allow the municipalities to declare bankruptcy under Chapter 9, which was denied on June 13^th 2016 in a 5-2 decision. The rationale for states not being allowed to declare bankruptcy is that they have the power to tax – e.g. to raise revenues – and implement fiscal reforms to cut expenses and balance budgets.

There is also no sovereign bankruptcy code (though the IMF has been trying to appoint itself the sovereign bankruptcy legal authority for years now). Virtually no nations support the development of such a policy, as being subject to a supra-legal authority would naturally violate what most define as sovereign status. The EU is trying to change that (see: Greece), but so far hasn’t made any progress. However, the lack of sovereign bankruptcy law has never stopped a country (ahem, Argentina) from defaulting and restructuring its debt. The debt restructuring process in cases of default not covered by bankruptcy law of a particular country either:

·         Has to be “voluntary,” which requires negotiation with the creditors; and

·         Necessarily becomes governed by contract law and is subject to adjudication under the laws where the bonds were issued.

·         Specifically, the terms of the bond contract of the debt issue(s), the rules and potential remedies under circumstances of default, and the priority of payments are spelled out in the bond indenture(s) and the country or state’s constitution.

·         In the cases of Argentina and Puerto Rico, some of their debt was issued under NY state law.

Puerto Rico’s Fiscal Crisis in a Nutshell

A tremendous amount has been written about the fiscal and debt crisis in Puerto Rico, with approximately 99.9% of that written by people better informed than myself (special shout out to my muni bond buddies at Morgan Stanley!). The following highlights two issues, which are indicative of the government fiscal irresponsibility colliding with federal regulations that strain the economy – the combination of which has created a morass of inefficiencies and government malfeasance dating back many decades.

1.       The Puerto Rican welfare system provides more generous benefits that (a) exceed the welfare system in the US; and (b) can exceed that working for the federally mandated minimum wage. Additionally, the labor laws veer towards those of more socialist countries (e.g. France) where overtime, extensive paid vacation, yearly bonuses and dismissal of employees is much more costly. This creates a profound disincentive to work, for employers to expand hiring, and thus one of the worst rates of labor participation in the world.

The following is excerpted from an outstanding report, commissioned by the government of Puerto Rico, researched and written by former IMF economists who were given exceptional access to data - much of it unpublished, as Puerto Rico is significantly deficient in timely reporting, completeness and transparency of their financial and economic data* - and to government officials. From the Krueger Report, Puerto Rico - A Way Forward, from June 29, 2015 (formatting and emphasis added).

Employment and labor costs.  The single most telling statistic in Puerto Rico is that only 40% of the adult population – versus 63% on the US mainland – is employed or looking for work; the rest are economically idle or working in the grey economy. In an economy with an abundance of unskilled labor, the reasons boil down to two.

·         Employers are disinclined to hire workers because:

a.        The US federal minimum wage is very high relative to the local average (full‐time employment at the minimum wage is equivalent to 77% of per capita income, versus 28% on the mainland) and a more binding constraint on employment (28% of hourly workers in Puerto Rico earn $8.50 or less versus only 3% on the mainland); and

b.       Local regulations pertaining to overtime, paid vacation, and dismissal are costly and more onerous than on the US mainland.

·         Workers are disinclined to take up jobs because the welfare system provides generous benefits that often exceed what minimum wage employment yields; one estimate shows that a household of three eligible for food stamps, AFDC, Medicaid and utilities subsidies could receive $1,743 per month – as compared to a minimum wage earner’s take-home earnings of $1,159.

The result of all of the above is massive underutilization of labor, foregone output, and waning competitiveness.

Notably, one of the recommendations of the Krueger report is that they petition Congress to allow Puerto Rico to either be exempt from, or pay a lower minimum wage than federal law requires, and reduce the supplemental Medicaid benefits which are higher than those in US, so that it will incent people to work and get off of welfare.

2.       The public pension systems have been looted by both the government and those contributing to the system and eligible for benefits. Pensioners have been promised benefits that were never capable of being paid, and legislation passed in 2013 to “reform” the pension system has subsequently been ignored by government officials. Raising the retirement age for teachers from 55 to 65 was met with strikes and unrest.

For an excellent synopsis of the history of the pension crisis, read this April 2016 Reuter’s article by Nick Brown, titled Puerto Rico's Other Crisis: Impoverished Pensions. The following are a few brief excerpts (edited, with formatting and emphasis added), but the entire article is well worth reading, in particular because it so deeply mirrors the situation currently occurring in Greece.

Puerto Rico attempted to shore up its chronically underfunded public-employee pensions in 2013. …Under the reform package, retirement ages rose. So did employee contributions. Current and future participants were transferred to less-generous defined-contribution accounts, similar to 401(k) retirement savings plans. … To give the politically painful fixes time to take hold, the reforms required government employers to fund the pensions in the short term through annual lump-sum payments. The central government was supposed to have made $367.6 million in such payments since 2014; so far, it has forked over just $22.7 million.

Since Puerto Rico gained self-rule in the late 1940s, improvident populist governments have lavished additional pension benefits on public employees, from holiday bonuses to loans for international travel. These measures have rarely been accompanied by moves to pay for them, and occasional efforts to fill the funding gap have fallen short.

Governor Garcia Padilla’s administration on Feb. 1 unveiled a plan that would preserve pensions while reducing what’s owed to bondholders. The Obama administration also promoted a plan to protect pensioners over investors.

But creditors with lobbying power -- including hedge funds, mutual funds and bond insurers -- want the Puerto Rican government to do more to curb spending, on pensions and other things. One source in the creditor camp called it “insane” to propose that “bondholders … effectively take all the hit.” 

Populist Luis Munoz Marin, Puerto Rico’s first elected governor, in 1956 instituted cultural excursion loans for pensioners. Puerto Rico was in “a stage of rapid social, economic and political development,” the 1956 law said, and should aim to enable “the largest possible number of Puerto Ricans to travel to foreign countries.”

Today, ERS and TRS participants can take out as much as $5,000 to travel if they can show that the trip will be culturally rewarding. The pensions also offer as much as $5,000 for personal loans and $100,000 for mortgage loans. Together, the two funds have more than $1 billion tied up in illiquid loan portfolios.

The largess continued under Luis Ferre, governor from 1968 to 1972, who increased benefits and instituted mandatory Christmas bonuses. Last December, creditors griped privately when Puerto Rico doled out about $120 million of the bonuses even as it missed some minor bond payments.

Christmas and medication bonuses, ad hoc cost-of-living adjustments, death benefits and other perks were expanded periodically throughout the 1980s, ’90s and 2000s. These now account for nearly $3 billion in liabilities, according to Milliman’s latest actuarial report, even after reductions under the 2013 reforms.

Yet when Hernandez Colon won the governor’s seat in 1972, his administration approved perhaps the most structurally damning benefit of all. Under a 1973 amendment to existing pension law, government employees who retired at 55, with 30 years of service, were entitled to lifetime annual payouts worth 75 percent of their salary.

That percentage was based not on a worker’s career average salary, but on the average of his three highest salaries. So those who were promoted close to retirement, or for only a short time, could earn lifetime pensions disproportionate to contributions.

“People were making pensions that might not have reflected the average of what they were putting in over decades,” said Marcos Rodriguez-Ema, a banker and former government official involved in pension reform efforts in the 1990s and 2000s.

Contract Law and Constitutional Law Protects Investors and Enforces Fiscal Reforms

There are two sides to this argument and they are summarized quite intelligently and eloquently in the following articles:

·         Profit At Any Cost - How Some Hedge Funds Wins by Making Sure Puerto Rico Loses; and

·         Should Puerto Rico Be Allowed to Restructure Its Debt?

The legal issues are outstandingly summarized in the second article, written in part by J.W. Verret. Below are some excerpts (emphasis added):

Puerto Rico’s dim prospects for resolution have prompted federal intervention. While this may be necessary, there are far more productive and responsible ideas that can be implemented at the federal level to help Puerto Rico than the quasi-bankruptcy approach embodied in the most recent draft of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA).

The “collective action” clause in PROMESA is a disaster for property rights, bondholders, and the people of Puerto Rico. This clause is rightfully regarded by many as both counterpro­ductive to a successful resolution of Puerto Rico’s looming debt default and a violation of the traditional American belief in property rights.

The first draft of the bill contained a “cram down” on creditors as is found in a typical bank­ruptcy proceeding. The new version of the bill then inserted a collective-action restructuring provision to demonstrate the appearance of adherence to freedom-of-contract and rule-of-law principles. But the bait and switch is transparent.

Collective action clauses can be a useful device in bankruptcy, when they are anticipated in advance. However, PROMESA is not supposed to be a bankruptcy process. Additionally, Puerto Rico government bonds were not sold with the prospect of bankruptcy as part of the deal.

These bonds were sold with the expectation that any creditor would have a chance to be the “holdout” creditor, and the holdout option was priced into the initial purchase. It is a clear violation of the creditors’ contractual rights to now take away that contract right. If Puerto Rico wanted to deny creditors a holdout right, it should have specified that in its debt contracts.

The cram-down provision is being defended on the grounds that the property rights of a group of creditors are less legitimate, solely because they have purchased the bonds at a discount. Further, American taxpayers have long supported Puerto Rico with generous subsidies and grants, while Puerto Ricans do not pay federal income taxes. American taxpayers have been incentivized to purchase Puerto Rico debt. It does not follow that it is legitimate to repudiate—partially or in full—debts that are purchased in the market and defined according to contract.

A principle that flows from the property-rights centered design of the US Constitution is that the market price paid to obtain a contractual right in the securities or debt markets should not impact the legal protection afforded to that right. Hedge funds may exercise their free speech to prevent diminution of those contractual rights. The protection of investors’ contract rights is not to be confused with rent-seeking.

I am going not to recap the first article in support of hating distressed debt hedge funds. Though I do suggest you read it, since it provides a reasonable and thought-provoking outline of the competing arguments. The crux of the article, and the tiresome and self-serving “moral outrage” over distressed debt hedge funds profiting (OMG!) by pursuing legal enforcement of contract law, has exhausted my patience. Demonizing people who are wealthy (and dangit, I’m not one of them) – and stereotyping them because they are bankers or investors and therefore must not be “American families” – is disgusting. Exhorting prejudice and perpetuating hatred to service political ambitions (ahem) is no better on the left than it is on the right. But to go further and claim that people’s property rights should not be entitled to legal protection under the law simply because you believe them to be wealthy or judge their business to be morally repugnant (should car salvage businesses, pawn shops and real estate companies that buy foreclosed homes also be legally impaired?) is a perversion of contract law and our justice system.

Closing Remarks

The last data I saw indicated the Puerto Rican bonds are trading between 40 cents and 70 cents on the dollar depending on the issue. Since the downgrade to junk status, estimates are that anywhere from 20% to 50% are held by distressed debt hedge funds. Investment grade bond funds are not typically allowed to hold non-investment grade debt, and became forced sellers when the credit ratings were downgraded. The fact the prices have held up that well is probably in large part due to the intervention of these “vulture hedge funds” who are willing to buy the imminently defaulting bonds and pursue their contractual rights in court, enhancing the recovery potential. This is similar to the recent situation in Argentina, and the process will likely be expensive, drawn out and difficult for all involved.

I don’t pretend to understand the complexity of the arguments and emotions surrounding Britain’s upcoming vote to exit the EU. But if I were a British citizen watching the US grapple with Puerto Rico’s imminent default and potential bailout of a “not quite sovereign” nation, largely due to gross fiscal mismanagement and conflicting federal law which exacerbated the fiscal distress – I would be deeply concerned about where the EU is headed.  First with Greece, then potentially Portugal, Italy and probably France following in those footsteps of restructuring and/or default due to a non-competitive economy and irresponsibly promised benefits that cannot possibly be sustained.