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Market resists restructuring reform

Sovereign debt

Anne Krueger

Anne Krueger is triumphant. At the IMF's annual meetings this year, the first deputy managing director saw her pet project - a sovereign debt restructuring mechanism, or SDRM - endorsed by everyone who matters, from the G7 to the Fund's own international monetary&financial committee (IMFC).

Everyone, that is, except for the two constituencies at which it is squarely aimed: emerging-market borrowers and private-sector lenders.

All the same, it is a stunning achievement for Krueger and the IMF. When Krueger first mooted the idea in November, the US Treasury immediately shot back with a more market-friendly counter-proposal, and SDRM was generally considered mortally wounded. But it didn't die: it simply changed shape and came back, with important changes, in April. Even an unprecedented unanimous attack from an alphabet soup of private-sector trade groups failed to stop the resuscitation: the combined forces of banks (IIF, IPMA), traders (EMTA, SIA, TBMA) and bondholders (EMCA) were powerless to stop the resuscitation of the new SDRM.

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