García Padilla also told the newspaper the island will seek concessions with its creditors, which may include deferring some debt payments for as long as five years.
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The governor's remarks came accompanied by a report authored in part by Former World Bank Chief Economist Anne Krueger, which states that Puerto Rico "faces hard times. Structural problems, economic shocks and weak public finances have yielded a decade of stagnation, outmigration and debt."
"The ... report for the first time acknowledges the true extent of the problem," said García Padilla in a statement. "We must make difficult decisions to meet the challenges we now know are ahead, and I intend to do everything in my power to lead us through this time."
The island's general obligation bonds, which had already been falling, extended their losses to trade below 69 cents on the dollar following Earnest's remarks.
MBIA, one of the largest municipal bonds insurers, also took a hit as their stock fell about 20 percent in Monday trading.
—Reuters contributed to this report.