The International Monetary Fund, convinced that Europe erred in forcing debtor countries like Greece and Portugal to bear nearly all the pain of recovery on their own, is pushing hard for a plan that would impose up front losses on bondholders the next time a country in the euro area requests a bailout.
Scarred by its role in misjudging the depth of the Greek recession and rebuffed in its attempt to get European governments to write down their Greek loans, the I.M.F. is advocating a more aggressive approach to debt restructuring to try to ease the rigors of German-style austerity.
But the proposal — which is still being hashed out behind the scenes by top economists and lawyers at the fund — is encountering stiff resistance, not just from the powerful global banking lobby, but also from European policymakers, and more recently, the United States government, which is the I.M.F.'s largest financial contributor.
Indeed, despite tough talk on both sides of the Atlantic about making bond investors share the cost of bailouts with taxpayers, the world's largest economies seem to have accepted the dire warnings advanced by investors and bankers that the I.M.F.'s proposed new approach would badly roil still-fragile credit markets in Europe.
"The fund has been bruised and abused," said Susan Schadler, a former I.M.F. economist and the author of a recent paper that argues the fund broke its own rules in lending to near-bankrupt Greece. "But in the end there is no trade-off between austerity and debt restructuring — you have to do both," she said.
(Read more: Troika set to get tough over Greece budget shortfall)
Germany is leading the opposition. Policy makers in Berlin and Frankfurt see the Greek debt restructuring in 2012 as a one-off. And they regard any deviation from their core principle — that debilitating debt is to be reduced almost solely via the hard medicine of spending cuts and tax increases — as an escape from fiscal responsibility.
The I.M.F.'s debt plan has been endorsed by the body's top leadership,including the first deputy managing director David Lipton, a widely respected former Treasury official. The initiative is seen by a number of outside sovereign-debt experts as the best of a range of admittedly tough choices in responding to future debt crises.
But the push back against the proposal, which has caught I.M.F. officials off guard, has delayed a planned introduction early next year, with any blueprint now not expected to be presented to the fund's executive board until June, at the earliest.
The fund declined to make any executives involved in the project available for comment.
(Read more: 'Uneasy Calm' in Euro Zone Bonds Could Be Over)
At the root of the issue is the long-simmering dispute between Europe and the I.M.F. over who should pay the bill the next time a country in Europe needs a bailout: taxpayers and workers, or bankers and investors.
These tensions were on full display during the I.M.F. meetings in Washington this fall, when Jörg Asmussen, the powerful German representative on the European Central Bank's executive committee, explained why Germany vetoed the fund's idea that some of Greece's debt, most of it now held by Europe, should be written down.
"The fund is talking about other people's money," Mr. Asmussen, cracking a thin smile, said at a German-sponsored policy forum.
In some ways, the clash is a function of whose money is at stake.
With Europe on the hook for around 340 billion euros ($460 billion) in loans to bailed-out countries in the euro area, compared to €79 billion for the I.M.F., it is not surprising that Mr. Asmussen and his sponsors in the German finance ministry have responded to the I.M.F.'s push for others to accept losses on existing debt by saying, in effect, you first.
(Read more: Will the euro 'speak' German or European?)
That could never happen given that the I.M.F.'s status as a preferred creditor — meaning its loans get paid back before those of any other lender — is perhaps global finance's most sacred writ.