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.
European stock markets fell today as concerns of a default troubled investors.
The Dow Jones industrial average is down 1pc at 12,834.98, while the broader S&P 500 has fallen 1.04pc to 1,350.11.
The FTSE 100 in London was down by 1.36pc, the CAC-40 in Paris was off 2.4pc and Frankfurt's DAX dropped 2.35pc in afternoon trade having fallen earlier.
The IIF report also said an unstructured default 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.
Meanwhile, the eurozone is now in "mild recession" while the area grew less than previously forecast last year.
A slowdown which began in the middle of last year is continuing pointing to a “double dip” recession over the coming three years with the region hard hit by the debt crisis.
“The euro area is currently in mild recession,” said the EU Economic Affairs Commissioner Olli Rehn.
While official figures for the first quarter of this year are not yet available, Mr Rehn is suggesting that the economy contracted in this period.
The official definition of a recession is two consecutive quarters of a contraction in an economy.
In the fourth quarter of the year, Eurostat said Gross Domestic Product in the region contracted 0.3pc.
The area’s economy grew by 1.4pc last year, less than the 1.5pc previously forecast.
According to the EU statistics office Eurostat, this compares with growth of 1.9pc in 2010.