Greece has survived April 9th, the first possible date of the default. Some people moved the deadline to May 9th (weekend), others to May 12th. We hear that it could come in late May or June, too. Check this debt timeline. The government could actually be able to raise cash from the Greek citizens, the patriots who want to support their communists in charge and who know that things will be even worse if and when the government goes bust. No foreigners are buying the new Greek debt anymore but the domestic lenders could be a factor that was underestimated.
Because Greece has vigorously pissed on the April 24th deadline and one may expect at most a "Hi" from the meeting in Riga, the EU commission has set a "decisive" new deadline at May 11th.
But whatever the exact dates are, it seems likely that the default isn't too far. The Syriza comrades' promises that they would be able to suck the financial blood (ever growing amounts of it) out of other European nations by a "clever" combination of blackmail and doublespeak isn't working at all. If they don't want to be remembered as the men who threw Greece into the third world, they may have the last days to admit that they have lost. They need to apologize to everyone whom they have offended, admit that Marx, Tsipras, Varoufuckis, Krugman and similar individuals are just worthless piles of stinky garbage, and immediately start reforms – much more systematic and deeper pro-market reforms than what Samaras was doing in recent years.
Doing "just the same as Samaras" may fail to be enough right now.
Today, the stock markets are nervous – dropping by a percent – but everything else indicates that the risk for contagion is virtually zero. While the yields on the Greek bonds keep on growing quickly, the other European yields stay near the absurd minima. The latter fact isn't too hard to understand because the European Central Bank got used to its bond-purchasing program.
(More nontrivially, the euro seems to keep itself near $1.08.)
So it is virtually impossible that the yields on the other nations' bonds will skyrocket soon. What are the other ways by which the Greek collapse could spread to Europe? No foreign players own the Greek toxic junk anymore. But you could think of exceptions: the Greek banks have subsidiaries in a few other nations. Maybe these banks with Greek mothers hold lots of Greek bonds and similar toxic junk. They could start to collapse as well and encourage other financial subjects and companies in those countries to go bust (or be worried) as well.
Well, this won't work, either. The daughter banks in Albania, Bulgaria, Cyprus, Romania, Serbia, Turkey and Macedonia (Yugo) have been placed in a quarantine. They are obliged to sell all assets that will go worthless once the Greek government defaults on the debt. Bonds, T-bills, T-notes, things linked to savings inside Greece. This will mean some write-offs and pressure on these daughter companies but the situation becomes as transparent as you can get. Be sure that this helps to increase the Greek yields, too.
The negotiating power of these Marxist thieves is close to zero. The sooner they realize that, the better for the Greek nation. There is still a tiny chance that the default may be avoided. But even if it is not, there is still a big difference between an orderly, planned, consensual default and a chaotic, hostile, and unpredictable one.
Yanis Varoufuckis was asking the International Monetary Fund whether he could simply repay some money a month later, or two, or perhaps when the growth is good enough. ;-) He was quickly given the answer that he may understand with his good English: No. It is not really possible, Yanis.
The International Monetary Fund has the "hidden authority" of a well recognized global financial institution – money from lots of nations (including nations that were poorer than Greece so far) are being put at risk by the IMF – so it always gets its debt back. In fact, there have only been "arrears" i.e. delays so far. You may want to look at the tables of all the countries with arrears. Right now, the sinners include Somalia, Sudan, and Zimbabwe.
In the years since 1997, you also find Liberia, Congo (Dem.), Afghanistan, Iraq, Serbia (after the war over there), and a few others. The amount that the country owed has never substantially exceeded 1 billion dollars. Can you imagine that Greece is planning to refuse to pay those hundreds of billions of dollars it owes to the IMF? Should such a country be allowed to control a territory?
Somalia, Sudan, and Zimbabwe are not terribly trustworthy countries, are they? Greece would immediately become the "big boss" of this group of nations. Such a rogue nation is of course planning to stay in the Eurozone and our "prestigious" European Union.
It's reasonable to expect that once the Greek government goes bust, a substantial portion of the Greek commercial banks and private companies will follow the government's example. The banks will lose access to the foreign emergency cash (ELA from ECB etc.) and because they hold lots of Greek government bonds, these banks will collapse, too. The other companies will lose access to the cash through the Greek commercial banks whose fate was described in the previous sentence.
Marxist loons like Tsipras and Varoufuckis have been dreaming about the elimination of the evil banks and evil capitalists for decades. Finally, they may make their dream come true. Banks and the evil capitalists will cease to exist in Greece – in other words, the Greek economy and the structure of that society will be completely ruined. People will have the opportunity to be reminded that the human flesh tastes almost like pork. The most important observation of Varoufuckis in HuffPost today is that his party is beloved. It may mean that his flesh will taste good, too. His boss Tsipras was also funny today: Greece and Cyprus are the islands of stability. ;-)
Because the untrustworthiness of the new Greek government has already harmed the Greek economy in new ways, people over there must realize that they may afford to pay much less to the public workers and pensioners etc. than what Samaras was doing in recent years. Because of the shortage of the hard currencies, I think it's unavoidable for Greece to start to circulate a new currency, or IOUs ("I Owe You" [N euros] notes).
They should probably introduce a system of two currencies in this way (which immediately makes them violate the Eurozone rules, i.e. Grexit, but I think it's the least important part of the process). All of the public worker salaries and other similar payments should be paid in the new currency, while they should still use the hard currencies to try to continue "business as usual" with other countries and foreign and international institutions.
The government should probably print the new Greek euros and codify laws that make it mandatory for the Greek sellers and services to accept both euros and the Greek euros at parity (in practice, it would mean that everyone officially pays with the [less valuable] Greek euros, of course, while many people get their Greek euros at a better-than-parity rate on the black market). Under this system, it is obvious that the actual market value of the Greek euro would be much smaller – perhaps 1/2 of the euro, perhaps 1/10 of the euro. But the government probably has to try to mask the actual exchange rate so that the people don't think about it and don't realize that from a hard currency viewpoint, they are getting poorer very quickly.
If you hold the IOUs – the new currency will later be renamed "1 crashma = 100 fiascos" – you have the problem that even though it seems to be 1/3 of a euro on the black market now, it may become 1/30 of a euro later. Non-hard currencies are always a potentially huge trouble for savers in the long run.
Convertibility of one's currency is a great thing – one of the first necessary achievements that Klaus et al. had to plan and establish in Czechoslovakia right after the Velvet Revolution – but some basic financial balance is a necessary condition for convertibility. In certain special conditions, a non-convertible currency may probably be a good idea to preserve an internal "ecosystem".
In this way, Greece could be kept afloat. In a year or two, people could suddenly notice that their life may continue even though their salaries converted to the hard currencies are e.g. 5 times lower than they were in 2014 – because the prices expressed in the hard currency are going to drop as well (but not as quickly as the Greek euro: there would be some inevitable inflation of the Greek-euro prices). But this decrease is needed in one way or another – it's the reality. Greece is simply not an advanced enough country to the extent that it could pay thousands of dollars for pensions etc. As Barack Obama would say (in a different, wrong context), the country doesn't make anything.
It seems more likely that the Varoufuckises will continue to be stubborn – and maybe, they will get even more stubborn. Hostility to Germany (and others) and nationalism will strengthen in the nation as people frantically support the leaders' "patriotic", suicidal behavior. At some point, they will notice that their trouble isn't spreading to the rest of Europe despite the promised "contagion". So they may try to help it to spread. Greece may invade Macedonia, for example. Be sure that Macedonia will easily defeat Greece, despite the new S-300 missiles that Greece is buying for its last pile of German cash.
Will the Greek politicians preserve at least some "trace" of trustworthiness and peaceful relations with the other European nations, or are they going to assure everyone else that it's just right that the Greek nation is starving to death and it would be a mistake to throw some food aid over there? We will probably see soon. Already now, before any official default, people could perhaps start to see where this kind of "Krugmanomics" leads. It is utterly incompatible with the civilized life of any nation.