A disorderly default in Greece would probably leave Italy and Spain needing outside help to stop risks spreading, and cause more than 1 trillion euros damage to the euro zone, the Institute of International Finance said.
"There are some very important and damaging ramifications that would result from a disorderly default on Greek government debt," the IIF said in a document obtained by Reuters.
"It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed 1 trillion euros."
The document, obtained from a market source, was dated February 18 and marked "IIF Staff Note: Confidential".
The IIF wants bondholders to sign up by a Thursday deadline for a bond swap deal aimed at saving Greece more than 100 billion euros and putting the country on a more stable footing.
If it fails to win support, the ECB would likely suffer substantial losses, the document said, estimating the central bank's exposure to Greece of 177 billion euros was over 200% of its capital base.
Both Ireland and Portugal would need more outside help to insulate them from Greece, which could cost 380 billion euros over five years, the IIF estimated.
A disorderly Greek default would also probably require "substantial support to Spain and Italy to stem contagion there", which could cost another 350 billion euros, it said.
The IIF, which helped negotiate the bond swap deal on behalf of creditors, said there would be more massive bank recapitalisation costs, which could easily hit 160 billion euros.
