Argentina in the late 1990s is a good example of an economically troubled country that did exactly what the experts told it to do, but wound up in a bigger mess because the people got fed up with austerity.

When its debt problem became too difficult to manage in 1997, Argentina embarked on an IMF "precautionary programme" to help bring its deficit under control.

By 1999, the country was in recession and shrinking at an annual rate of 3.4%. The recession continued into 2000, but the government pushed on with its deficit-cutting nonetheless. By the end of the year, it was forced to take a $14bn bailout.

It got worse from there. The recession deepened in 2001, leading to a voluntary 'mega swap' of foreign debt to create some breathing room. This was followed by another $8bn IMF rescue.

Finally, after three years of recession, there was a general election. The opposition put forward a radical proposal: vote for us and we'll default. The economic pain had become intolerable, so promising default was politically worthwhile.

"At some point, it becomes clear that austerity is not enough and you are not going to grow your way out of difficulty," said Matt King, global head credit strategist at Citigroup. "Either you need aid or you need debt reduction. We have deliberately chosen to postpone that problem by creating the European Financial Stability Fund."

In December 2001, the Argentine government fell. The new government immediately defaulted on foreign debt. Instead of an economic renaissance in 2002, however, GDP declined by 10.9%. The recession was almost twice as bad following the default.