The US Treasury Department on Wednesday proposed a plan to rescue Puerto Rico from default, but said that it needed approval from the Republican-controlled Congress.

The finances of the Caribbean island — a US territory since the 1898 Spanish-American War — were dealt a crippling blow in 2006 with the loss of federal tax breaks for US companies with local operations.

It has been in and out of recession in the years since. As economic activity shrank, the government papered over budget shortfalls with fresh borrowing.

Today, its debt stands at around $72 billion (64 billion euros), and the White House has ruled out a financial bailout for the the former Spanish colony.

“Puerto Rico cannot reverse a decade of economic decline on its own,” the Treasury Department said in a statement.

Only Congress has the authority to “provide Puerto Rico with the necessary tools to restructure its financial liabilities in a fair and orderly manner under the supervision of a federal bankruptcy court” while also “creating the foundation for recovery.”

Currently, only US cities can legally go into what is known as Chapter 9 bankruptcy protection. Detroit took this drastic measure during the depths of an economic crisis in 2013.

The Barack Obama administration also wants Congress to authorise independent fiscal oversight “to certify that Puerto Rico adheres to the recovery plan it is implementing in a credible and transparent way,” and wants Congress to reform the Commonwealth’s Medicaid program, and provide tax credits for the island.

Puerto Rico needs help fast because the emergency actions it took will be exhausted this winter, the Treasury Department said.

Over the past decade more than 300,000 people left the island as its economy shrank.

Puerto Rico’s 3.5 million residents are US citizens, though they cannot vote for president if they reside on the island. They have no representative in the US Congress beyond a token observer.

Debt ratings agencies had already downgraded Puerto Rico bonds to junk status before it paid only a fraction of a $58 million debt that came due August 1.

Puerto Rico’s governor Alejandro Garcia Padilla welcomed the proposal from the Treasury Department.

“My administration has made a concerted effort to work with the Obama Administration and Congress over the past three years and these measures are a direct reflection of our shared commitment to the future of Puerto Rico,” he said in a statement.

“I look forward to having ample discussions in Washington and Puerto Rico regarding this new proposal,” he added.