Currency devaluation is best understood not as an alternative to austerity, but as the correct way for a debt-burdened society to implement austerity.
Why did Iceland recover and Ireland get worse? Iceland had a currency to debase. And they debased their currency enough to reset the economy and grow again. Three cheers for currency debasement. Ireland on the other hand, couldn’t debase the Euro. Like a nation on a gold standard, they had no way to make monetary policy changes to get the economy moving.
So if austerity works, shouldn’t it be the other way around? A stagnant Iceland and a booming Ireland?