IIF warns of massive Greek default fallout: report (by MarketWatch)

FRANKFURT (MarketWatch) -- A disorderly default by Greece would likely force Italy and Spain to seek aid to prevent being engulfed by the debt crisis and would cause more than 1 trillion euros ($1.36 trillion) in damage to the euro zone, the Institute of International Finance warned in a recent document, Reuters reported Tuesday. The IIF, a banking trade group, helped negotiate a voluntary Greek debt swap that aims to cut more than 100 billion euros from Greece's debt pile. Failure to complete the swap could endanger the country's second bailout, leaving the potential for a hard default. The European Central Bank would likely suffer major losses, the document said, putting the ECB's Greek exposure at 177 billion euros, while Ireland and Portugal woould likely need further assistance. A default would also likely trigger at least 160 billion euros in bank recapitalization costs, the IIF warned. An IIF spokesman didn't immediately respond to a request for comment on the report.