The United States could be headed for its own Greek crisis with states and municipalities on the verge of bankruptcy.
The New York Times reports that Illinois has now topped California as the US state most likely to collapse. It has a pension scheme that's 50% underfunded and has a deficit of nearly $12 billion, equal to nearly half the state's budget.
The underfunded retirement debt is the biggest contributor to the problem with the Chicago Tribune reporting that the money allocated for the retirement of its public servants totals a whopping $130 billion. The state pays $1 billion a year in interest alone and it's the most underfunded pension scheme in the US. Indeed, Illinois is now ranked as number eight for the likelihood of bond holder defaults, which makes it a bigger risk than Portugal. Greece is number one. California is not much better, coming in at ninth.
Now technically, no US state will go bankrupt because the US Government would step in to bail it out. But if it defaults or, as is more likely, if it lays off thousands of workers, the reverberations will flow through a weakened economy. Unemployment will continue to grow and housing prices will be pushed down further, destroying what's left of household wealth.
Just another example of the profligacy and mismanagement that has left the US economy damaged for years to come.
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Thanks to Blago, rates of bankruptcy in Illinois are the highest they have been in five years. The Land of Lincoln is now on the verge of dying.