Puerto Rico downgraded to 'junk' status

A worker sweeps up litter on November 14, 2013 in San Juan, Puerto Rico. The Government remains the largest employer in Puerto Rico and can only service about 11 percent of the pension costs out of its budget.
Christopher Gregory, Getty Images

SAN JUAN, Puerto Rico - Puerto Rico's governor says he is renegotiating the payment of short-term debt and has ordered all government agencies to reduce their current budgets by 2 percent after the island's credit rating was downgraded to junk status

Alejandro Garcia Padilla made the announcement Wednesday on radio station WKAQ. 

Spokeswoman Paola Figueroa tells The Associated Press that the governor will make additional announcements later Wednesday in response to the downgrade. 

Garcia said Tuesday that he also would be submitting legislation to further reduce the deficit and would present a deficit-free budget for the upcoming fiscal year. 

Puerto Rico is in its eighth year of recession while struggling with $70 billion in public debt and a 15.4 percent unemployment rate, higher than any U.S. state.