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Last Updated: Monday, 8 May 2006, 21:57 GMT 22:57 UK
Puerto Rico budget woes deepen
Protest in Puerto Rico last month
Anger has been growing over the financial crisis
Thousands of workers in Puerto Rico are threatening to go on strike after a budget crisis partially shut down the island's government.

The administration of the US territory has a $740m (406m) deficit but neither the governor nor the legislature can agree how to resolve the problem.

More than 40 government agencies have been hit, making thousands jobless.

The crisis has led international credit rating agency Moody's to downgrade Puerto Rico's bonds.

Moody's gave some of the bonds junk status while some were downgraded to just one notch above.

"This action reflects (Puerto Rico's) strained financial condition, and ongoing political conflict and lack of agreement regarding the measures necessary to end the government's multi-year trend of financial deterioration," Moody's said in a statement.

Biggest employer

Last week, the administration was forced to close 43 government agencies putting 95,000 people out of work. All schools were closed, meaning half a million students were sent home.

Mass demonstrations have been taking place on the streets of the capital, San Juan, but it is in the island's smaller towns that the effects are being felt.

Many people rely heavily on municipal services and are now having to do without basic amenities like water and health care services.

The islands governor, Anibal Acevedo Vila, is blaming the opposition-dominated legislature for failing to agree on how to pay off the huge debt.

The governor said that he is still working from the last approved budget, which is two years old, and that his proposals to introduce the islands first ever sales tax have been turned down.

The government is the biggest employer in Puerto Rico, accounting for up to 200,000 jobs. It pays about $500m in salaries.

Labour leaders representing electricians, truckers and other private sector workers are now threatening to strike in support of government workers, a stoppage which could begin on Tuesday.

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