NEW YORK (CNNMoney) -- Barack Obama, Nicolas Sarkozy and Angela Merkel descended on the G-20 summit last week intent on stabilizing Greece and resolving the European debt crisis. But Athens may instead end up seeking guidance from an unlikely source: Argentina.
A decade ago, facing burgeoning debt, a grinding recession and a devastating bank run, Argentina declared default on $132 billion in debt, the largest sovereign default in history. It also abandoned its fixed exchange rate with the dollar, sending the value of the Argentine peso plummeting.
Yet fast forward to 2011 and the country has enjoyed years of surging growth led by its cheapened exports, its GDP swelling 9.2% in 2010.
Is this a solution for Greece? Can it abandon its debts and an oppressive fixed currency -- in this case, the euro -- and use cheap exports to grow its economy?
This formula worked for Argentina, and likely appears more attractive to many Greeks than years of continued austerity measures. Economists caution, though, that it is fraught with challenges.
Greek Prime Minister George Papandreou rocked markets last week by announcing plans for a referendum on Greece's international bailout, calling it "a question of whether or not we want to be in the eurozone."
He later backed away from these plans, but there's still a risk that spending cuts and writedowns won't be enough for Greece to stay in the eurozone and manage its crushing debts.
What would the next step be? "It would be something like Argentina did," said Paul Blustein, a fellow at the Brookings Institution. "They'd have to issue a new currency."
Argentina pegged its currency to the greenback in 1991 at a rate of one peso to one dollar in a bid to control inflation and stabilize its banks. But in late 2001, after years of recession, Argentines lost confidence in their financial system and staged a run on their banks. The government was forced to severely restrict cash withdrawals and transfers of money out of the country, policies known as the "corralito," or "little fence."
"This had just a crushing effect on the economy, because people couldn't get their money," Blustein said.
The cash economy, upon which lower-wage workers such as maids and taxi drivers depended, ground to a halt, as did new investments. Riots broke out in the streets of Buenos Aires, killing 27 people.
Unable to provide the U.S. dollars needed to back bank deposits, the government announced an end to the currency peg, causing many Argentines to lose large portions of their savings. Left to float freely on the market, the peso eventually fell about two thirds in value, while GDP plunged 11% in 2002 and unemployment hit 25%.
Greece could expect similar disruptions if it exits the euro, analysts say, in addition to the chaos such a move would cause in the rest of Europe and in world financial markets.
To make matters worse, while Argentina at least had pesos already in circulation, Greece would have to mint a whole new currency and wait for its value to stabilize. Depositors would scramble to move their money to banks elsewhere in the eurozone before any currency conversion could be enforced.
"I think they'd be bound to go through a fairly difficult period in the short run, when they have no monetary unit which is generally acceptable," said John Williamson, a former adviser to the International Monetary Fund and senior fellow at the Peterson Institute.
Road to recovery: For Argentina, the currency conversion was traumatic, but it was not long before it mounted a comeback. GDP was back up to 9% by 2003 and hovered around there for several years, as exports were fueled by the weakened peso and a boom in world commodity prices.
The country also escaped its massive debts simply by renouncing them, waiting four years before negotiating partial repayment at a steep loss to creditors. Litigation continues to this day in courts around the world to recover portions of the sum, leaving Argentina effectively locked out of international credit markets.
Greek banks, the largest holders of Greek government debt, would likely collapse if Athens defaults in a disorderly fashion. The government, though, could actually have an easier time than Argentina in re-negotiating its debts and converting them to a new currency, said Hans-Joachim Voth, a professor at the Universitat Pompeu Fabra in Barcelona.
"Most of the Greek bonds were issued under Greek law, so they can just change it, whereas Argentina had issued bonds in New York and London," he said.
But the crucial part of the Argentine recovery -- taking advantage of cheaper exports -- won't be so simple for Greece. While Argentina has robust agriculture and manufacturing sectors and abundant natural resources, Greece offers little for foreign consumption beyond shipping and tourism.
"Greece really doesn't produce much that people want," Voth said and the chaos sure to follow a currency change would likely keep away investment in new industries, he added.
However the Greek debt crisis is eventually resolved, policymakers will continue to face many of the same hard choices Buenos Aires encountered a decade ago.
"I think the parallels are quite striking," Blustein said.
"A country has to decide -- are we going to subject ourselves to years and years and years of austerity and maybe at the end not even be able to avoid this terrible scenario, or do we go through a heck of a lot of pain in the short term and then try and get up and dust ourselves off?"
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