The International Monetary Fund warned on Friday that Greece may have to restructure its debt (i.e., extend its schedule of repayment), which it owes to the European Central Bank (ECB) and the IMF. The German Finance Minister said earlier in the week that he believes Greece needs to restructure for Europe to prevent another round of capital flight. The problem is that restructuring will increase the debt load, which the Greeks are unwilling to bear, and hence the protestations by the Greek Finance Minister over the idea. By most accounts, the Greeks are likely to default and a restructuring will only delay it.
This week's discussions on Capital Hill to raise the debt limit on the country's borrowing is a lot like the restructuring the ECB wants Greece to do. It merely kicks the can down the road and makes it easier to not do anything about the severely underfunded social security program that is coming due in the next decade.
Contrast this to the austerity measures undertaken by Thailand in the post-1997 Asian currency crisis. The result is a shrunken government sector and an economy that, after a short 18 months of pain, continues to grow at a steady clip.