All this chit-chat about Greece and Italy has caused another notable debtor to fly largely uncriticized recently: Ireland. So, I'll take care of that briefly and give a scoop of that country's situation. According to Paul Krugman (via Phillip Lane), this is how I read what happened there.
Aside from Luxembourg, which doesn't really count (because it's, well, Luxembourg), Ireland has the largest amount of external debt as a percentage of GDP, 1,165%! (Thank you World Factbook). What did they do?!
Not only did they borrow a lot of money (just like Greece... just like Italy... just like the U.S... wait, what?), but they also made risky investments abroad. That last bit is the proverbial "kicker." On one hand, the U.S., for example, borrows a great deal, but that money gets invested back in the economy. Ireland took a lot of that money, sent it out, and put it in "bets," so to speak. Sound like any sort of financial firm to you? And wouldn't you know it, Paul Krugman's article was called, "Hedge Fund Ireland." Now you learned something about hedge funds, too.
And now, the Irish people are taking the brunt of austerity measures (whatever the hell THAT means these days) because their government had an identity crisis and thought it could be a highly leveraged investment firm. Whoops... I'd be mad if I was you, laddie...