How electorates react to defaults
There are basically three reasons European leaders are still desperately trying to avoid Grexit.
First, the fact that a nation leaving the currency union is perceived as a leap into the dark. Many consider probable that higher volatility and insecurity will follow. So, reason one is: avoid financial turmoil.
Second, Grexit would mean Greece also leaving the European Union. This would be a serious blow for the unifying ideology of the European ruling classes, which is: the European Union is our destiny and nothing should be allowed to stop the march towards a single political entity. So, reason two is: avoid the collapse of our ideological world.
Third, Grexit may bring the publics in other countries to increasingly energetic protests against fiscal consolidation measures, thus bringing votes to parties that may displace incumbent ones. Reason three is: avoid a political domino effect.
On this third point, I’d recommend this article by Jeffrey Chwieroth, Cohen R. Simpson, and Andrew Walter on VoxEU. Chwieroth, Simpson and Walter suggest that “a Greek default would be more likely to lower rather than to raise the political incentives for other European governments to default, contrary to the expectations of many commentators and political leaders.”