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Critics attack IMF’s standstill proposal

Unrest in Argentina lent a new urgency to preventing disruptive sovereign debt work-outs. But few experts yet accept IMF first deputy managing director Anne Krueger’s idea for legal protection for sovereign debtors.

Anne Krueger

Anne Krueger, the IMF's recently installed first deputy managing director, provoked consternation when she addressed the National Economists Club annual dinner in Washington in November. Krueger used the occasion to propose new protections for countries that halt payment on their outstanding debt. Complaining that a "gaping hole" remained in the international financial system, she said: "We lack incentives to help countries with unsustainable debts resolve them promptly and in an orderly way."

Until recently IMF officials reacted cooly to similar ideas from such people as Harvard's Jeffrey Sachs and Barry Eichengreen of the University of California at Berkeley. But the approach is getting a different reception now. "The big change here," observes Princeton University's Peter Kenen, "is a very clear signal that the IMF isn't going to bail anybody out."

Krueger's speech came just a month before the unrest in Argentina flared.

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