It happens also in USA: Detroit city goes bankrupt
Detroit, July 19: Detroit, one of the largest cities in the USA, on Thursday filed the biggest municipal bankruptcy in the nation's history. It marked a new low in a decline that has left the USA's auto-making capital bleeding while leaving the city services in a shambles.
Four months ago, the city, which was once the nation's fourth largest with nearly 2 million residents, faced an debt of nearly $20 billion. Its population later decreased drastically, thanks to deteriorating law and order situation and basic services and the fleeing residents took their tax dollars with them.
An emergency manager was appointed who had the extraordinary authority to rewrite contracts and liquidate some of Detroit's most valuable assets.
Subsequently, unthinkable plans like forcing public employees to cut their retirement benefits or asking investors in municipal bonds, considered a safety net, take pennies on the money they lent to the city, were made. But yet the inevitable could not be avoided after the two groups objected.
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What has caught all eyes that few officials from either Michigan or Washington raised a strong protest against the decision to file for bankruptcy.
It is in total contrast to the case in the 1970s when President Gerald Ford stepped in with federal loans to prevent New York City from going bankrupt. Will other cities could also follow Detroit, the question worries observers and analysts.
Detroit, known as the Motor City, was known for its high per capital income in the 1950ss. But its deterioration started since the late-1960s when the race riots took place. Today, the city is known for its highest rate of violent crimes.
Police response is awful while basic services are in a mess. Forty per cent of the streetlights do not function while the rate of unemployment is above 18 per cent, more than double the national rate.
The city witnessed a mass exodus between 2000 and 2012 and as the population plummeted, the city saw its revenue falling alarmingly and the auto industry hit hard.