This is a breaking news item, so very thin on the ground so far.

http://www.bbc.co.uk/news/world-europe-33426328

So, worst case scenario - what happens? Greece leaves Euro, and the EU? Then what? Will it just tear itself apart while the rest of the world looks on, aghast that a country in the West has bankrupted itself?

Things would be very bad in Greece for some time. I'm not sure 'apocalypse' bad but pretty bad - the Greeks import a lot of essential stuff and the Drachma won't have much value on international markets. It could be the case (for example) if you get cancer in Greece you're pretty much stuffed because nobody can afford to import the required expensive drugs. Unless you're rich enough to be able to travel abroad and pay for treatment there, anyway.

Some of the issues Greece has will then probably end up happening in whichever Euro country has the next smallest economy. Whether that economy has been managed well enough to deal with them in a more stable fashion remains to be seen.

The most important thing for Greece is getting a proper tax collection system going. Tax evasion there is, and always has been, rife.

I've heard some sources state that the Greek government is currently running a surplus, largely due to massive cutbacks imposed by the EU banks as bailout conditions. So you have to ask why they need to make more massive savings or push large amounts of administrative effort into raising income, as oppose to helping all the Greek people who have been made destitute by austerity, given they will eventually pay back their loans with that ongoing surplus.

In fact all the Greek government have to do is change their tax laws so that people avoiding taxes are actually only evading taxes, which of course as we all know is a perfectly legal and normal practice used by anyone who matters.

What's that you say? Changing laws for political convenience would be a morally repugnant act and any government that does so forgoes any credibility? well, now you come to mention it...

There are two types of surplus you can run. One is before debt payments, the other is after.
That 1% surplus means they don't have to borrow new money for the first time ever. But it isn't enough for them to be able to pay off debt equal to more than twice the size of their economy.

Greece wouldn't have failed to make a payment the IMF last week if they were running the sort of surplus you assume.

Greek crisis: surrender fiscal sovereignty in return for bailout, Merkel tells Tsipras | Business | The Guardian
http://www.theguardian.com/business/201 ... ls-tsipras

That's the sort of deal you had to make with your parents when you were first a teenager