The Political Economy of the Sovereign Debt Restructuring Mechanism

The great surprise of the debate over the sovereign debt restructuring mechanism (SDRM) was not that the proposal of the International Monetary Fund (IMF) for international legal protection for bankrupt sovereigns failed, it was that the IMF was able to find the political space needed to put forward a proposal that generated a serious public debate on the need for sovereign bankruptcy. This paper delves into the reasons for the SDRM's failure.