????So how have Argentina and Latvia performed since choosing between the "Exit" and "Tough it out" approaches? After its devaluation in January of 2002, Argentina's GDP went into freefall, unemployment reached 20%, and the peso dropped to four to the dollar. But amazingly, Argentina was growing briskly again by the fourth quarter of 2002. And by 2004 -- a mere ten quarters from the onset of its recession-turned-depression -- its GDP had climbed back to its previous peak. From 2002 to 2011, its output jumped 94%, or over 40% adjusted for inflation, the fastest number in the Western Hemisphere, and twice the pace of Brazil.
????Argentina is far from a miracle. Its inflation is surging again, and it's despised by international investors since defaulting on $100 billion in foreign debt. Indeed, it put plenty of pain on other nations and creditors. Don't bet that a Greece or Italy will refrain from doing the same if it can stage an Argentinian-scale comeback.
????In Latvia, GDP fell over 22% in 2008 and 2009. But it still chose to remain tied to the euro, especially since the IMF and EU granted it 7.5 billion euros in bailout funds, almost 40% of current GDP. It's done a good job increasing its productivity by guiding investment into such areas as computers and pharmaceuticals. It also grew about 5% in 2011, though the rate is projected to fall to 1% or less this year.
????Still, Latvia is stuck with a currency that's far too expensive to allow the kind of export explosion that rescued Argentina. It faces years of slogging to get back to the kind of prosperity Argentina regained so fast. Unemployment stands at 12%, and the IMF projects that Latvia won't see a return to total output it posted at the peak in 2008, adjusted for inflation, until at least 2016.
????The question is whether Europe's weaklings are willing to suffer through the kind of long, grueling process Latvia adopted to slowly restore its competitiveness. So far, their reforms are scant.
????"It's the dilemma that Greece and the others are now facing," says Stancil. "The ailing nations are starting to figure out what the other path is, and that it's extremely tempting. It's painful, but it may be the best of only bad options."
????If those countries decide to do what's best for them, not what they're being told, the "Exit route" will prevail. For every month the crisis lingers, the more alluring the exit looks.
