American city of Detroit declares bankruptcy

An expert summed up the causes of this crisis in three points: “poor financial management, a shrinking population, an erosion of the tax base” over the past 45 years. AP / Paul Sancya

Standard of the triumphant automobile at the beginning of the XXe century, Detroit became Thursday July 18 the largest American city to declare bankruptcy, last act in the slow agony of “Motor City”. “I am making this difficult decision so that the people of Detroit have access to the most basic public services and so that Detroit starts again on a solid financial basis that will allow it to grow in the future”, Rick Snyder, the state governor of Michigan, said in a statement. “Bankruptcy is the only solution that will allow Detroit to become stable and viable again”, he had previously written in a letter that accompanied the deed filed with the court.

The debt accumulated by Detroit is vertiginous: $ 18.5 billion. Cornered, the municipality had warned last month that it would be forced to default on part of this sum. By taking the leap, Detroit becomes the largest city in the country to go bankrupt.

“FOREIGN PLAN” AMERICAN CITY

Amy Brundage, a White House spokesperson, assured that President Obama and members of his close team “continue to closely monitor the situation in Detroit”. “If Michigan field leaders and city creditors know they have to find a solution to Detroit’s dire financial straits, we are committed to continuing our strong partnership with Detroit as it works to regain the upper hand, revitalize and maintain its rank among leading American cities “, she added in a statement.

Abandoned house in Brush Park, Detroit, March 3.
Abandoned house in Brush Park, Detroit, March 3. REUTERS / REBECCA COOK

To get out of the rut, Rick Snyder had mandated an expert, Kevyn Orr who, quite soberly, had summarized the causes of this crisis in a few points: “financial mismanagement, a declining population, an erosion of the tax base over the past 45 years”. Scalded by Mr. Orr’s plan to negotiate with the city’s creditors, retirement funds to which Detroit owed $ 9 billion have launched legal proceedings to prevent any cut in the pensions of their subscribers. But bankruptcy puts the procedure on hold.

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Next step: a judge will now have to say if Detroit can place itself under the protection of the bankruptcy law which allows it to renegotiate its debt.

THE OPPORTUNITY TO END SIXTY YEARS OF DECLINE “

Michigan Governor Rich Snyder tried to be positive, saying the event was “the opportunity to end 60 years of decline” and come back with a new city, “stronger and better”. Beyond the strictly legal and financial aspects of the case, the bankruptcy of Detroit reflects the fall of the automobile, an entire section of the American industry which had boomed at the start of the last century. Cradle of “Big Three” (Ford, Chrysler, General Motors), the city linked its fate to that of the car, to the point that rock groups like the MC5 (“Motor City 5”) or a record company, like Motown (for “Motor Town”), were inspired when it came time to find a name.

But the slow economic and financial decline of Detroit went hand in hand with a social decline illustrated by the exodus of its inhabitants – Detroit lost half of its population in sixty years – and the glaring absence of public services. The municipality is unable to provide public lighting in certain neighborhoods. The crime rate has never been higher in forty years and the police take an average of fifty-eight minutes to arrive when called, compared to eleven minutes in the rest of the United States.

The World with AFP