Europe’s sovereign debt crisis is not unprecedented. The Greek predicament shares many points in common with what happened in Argentina. Both countries suffered from currency appreciation syndrome. In Argentina, the 1:1 dollar peg implemented in 1991 did not allow for adjustment in monetary policy to service high levels of foreign debt. In Greece, the strong Euro has had the same effect. Although both countries were forced to adopt severe austerity measures, Greece has a more restrictive set of policy tools, as Euro devaluation is not an option.
In the waning days of 2001, Argentina defaulted on the largest amount of sovereig....