Europe Has One Trillion Reasons to Keep Greece in the Euro Zone - by Matthew O'Brien

Here's how the IIF breaks down the costs of a disorderly default: $498 billion to stabilize Portugal and Ireland, $459 billion to do the same for Spain and Italy, a $232 billion capital hit to the ECB, $209 billion to recapitalize European banks, and $96 billion in losses for Greek bondholders. The below chart breaks down how these figures fit into the overall picture.

Clearly, the bulk of the costs would come from containing financial contagion in the rest of Europe's periphery. If Greece unexpectedly withdraws from the euro, investors will justifiably wonder if Portugal and Ireland or Spain and Italy are next, and likely dump those bonds. Overwhelming financial force -- i.e., gobs and gobs of money -- would be necessary to end the panic. The IIF price tag for such overwhelming financial force is even larger than TARP.

Europe Has One Trillion Reasons to Keep Greece in the Euro Zone - Matthew O'Brien - Business - The Atlantic