"The sooner it happens, the better for everybody because you will face reality rather than keep going through with the stagnation for a much longer time," he said in an interview on CNBC's "Power Lunch."
Sri-Kumar was in Greece last week to discuss debt payments with senior Greek officials, as well as talk to people in the private sector, such as the large banks. He said the Greek government's move last week to pay back some debt from an IMF holding account was a sign that "there is nothing left."
Read More Greek PM says time for action from lenders, IMF payment scrapes by
"If the Europeans decide to kick the can down the road again for three more months and give them more cash, then the default doesn't take place by August, it takes place by December," he said.
In the 1980s, Sri-Kumar was based in Latin America dealing with the sovereign debt issues there. But he said the situation in Greece is much direr because it doesn't have its own currency by which to print its way out.
"By the end of summer it's going to be very clear whether the Europeans are going to come to their aid and give them cash, or Greece is going to quit, or it's going to default and you're going to have lots of assets at much better valuations."