A DISORDERLY Greek default could cost €1 trillion and force Italy and Spain into bailout territory while Ireland and Portugal would need more funding, according to the Institute of International Finance.
An IIF document, seen by the Reuters news agency, said a failure of ongoing negotiations between Greece and bank creditors would leave the potential for such a default putting unprecedented pressure on Europe.
It also said such a development would mean major losses for the European Central Bank, which has a €177bn exposure to Greece.
A default would also trigger bank recapitalisation costs of at least €160bn, according to the IIF which is helping in the negotiations between Greece and the banks.
Greek has gotten agreement from some of its bank creditors that a deal will be agreed by the deadline of Thursday but not all have signed up.
News that Ireland could need more funding comes as the Irish government prepares for a referendum on the fiscal compact.
As part of the fiscal compact deal, countries that do not sign up to it will be excluded from the European Stability Mechanism, the €500bn fund that will replace the existing European Financial Stability Facility (EFSF) which we are currently accessing for the €67.5bn EU/IMF/ECB bailout loans.
Taoiseach Enda Kenny told the Dail two weeks ago that a vote on the fiscal compact was necessary following advice from Attorney General Maire Whelan.