“Is there any real experience of a country that went through successfully the sort of bitter medicine the PIGS and other Eastern European countries are taken (by that I mean deflating their economies to gain competitiveness so that they can have their real exchange rates depreciated)?”

Well the IMF says this in its staff report on the Latvian loan:

“Cross-country evidence indicates that there have been a number of episodes of important real exchange rate depreciation under currency pegs. However, in many of these cases, the real depreciation was achieved with help from outside forces, such as high inflation in trading partners or being pegged to a country that was not a dominant trading partner. The table below show countries with currency pegs that underwent real depreciations of 15 percent or more while preserving their pegs.”

They also provide a list of the countries as follows:

Côte d’Ivoire 1981-1984
1993-1994
Dominican Republic 1983-1984
Hong Kong SAR 4/ 1986-1987
2002-2006
Netherlands 1987-1989
Oman 1983-1988
1994-1996
2002-2006
Panama 1986-1995
Peru 1986
Saudi Arabia 2002-2006
Venezuela 1983-1987

Basically I know nothing at all about these programmes, but am not overwhelmingly convinced that any of them are that relevant to the problem we have to hand.