Greek exit aftershocks would be felt as far as Beijing

Athens Greece, responsible for 0.4 per cent of the world economy, now poses a threat to international prosperity as investors raise bets its days using the euro are numbered.

A Greek departure from the currency would inflict "collateral damage", says Pacific Investment Management Co's Richard Clarida, a view echoed by economists from Bank of America Merrill Lynch and JPMorgan Chase & Co.

At worst, it could spur sovereign defaults in Europe as well as bank runs, credit crunches and recessions that may spark more euro exits.

Global trade and financial ties mean the pain wouldn't be confined to the euro area. JPMorgan Chase estimates a one percentage point slump in the euro countries' economy drags down growth elsewhere by 0.7 percentage point.

Exporting nations from the UK to China would suffer and commodity producer Russia would face falling oil prices.

While the US may fare better, even it would feel echoes similar to the fin-ancial infection following the bankruptcy of Lehman Brothers Holdings Inc.

"An awful lot depends on what is done to limit the contagion within Europe," said Barry Eichengreen, a professor at the University of California, Berkeley, and author of a 2006 history of the European economy.

"If too little is done then, to use a financial term, all hell breaks loose. I can imagine things playing out that way."

Citigroup Inc economists, who earlier forecast departure chances at as much as 75 per cent, now are assuming as a "base case" that Greece will leave on January 1, 2013.

Merrill Lynch strategists estimate the euro region's gross domestic product would contract at least four per cent in the recession that follows, similar to the decline after Lehman's 2008 collapse.