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SDRM is dead, and that's official

After Mexico came to market successfully with its collective action clauses (CACs), most observers reckoned that the IMF's plans for a sovereign debt restructuring mechanism (SDRM) would not be taken any further. The US Treasury in general, and undersecretary for international affairs John Taylor specifically, was known to be a zealous proponent of CACs, and now that the market had managed to adopt them there was no reason to threaten it with SDRM.

But what happened at the spring meetings of the IMF in Washington came as a surprise even to the most optimistic private-sector lobbyists. Most of them expected the US, as the IMF's largest shareholder, to make vague noises about how SDRM might be a good idea in theory, and send it off to get studied by endless committees with the clear understanding that it would never actually be implemented. "We had thought that they were going to follow a policy of benign neglect," says Georgetown University Law Center professor Mitu Gulati.

In fact, US Treasury secretary John Snow was much more blunt than anyone had expected. In a statement to the International Monetary and Financial Committee, the body that essentially runs the IMF, he said that collective action clauses "are the vehicle to resolve the issues connected with sovereign debt restructuring".

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