A disorderly Greek default would cause more than a trillion euros (833 billion pounds) of damage to the euro zone and could leave Italy and Spain dependent on outside help to stop contagion spreading, the main bondholders' group has said.

Greek private creditors have until Thursday night to say whether they will participate in a bond swap that is part of a bailout and restructuring deal to help it manage its finances and meet a debt repayment on March 20.

Greece ratcheted up the pressure on bondholders to sign up, giving its starkest signal to date that it will make the offer binding and force losses on those who do not volunteer.

Its Debt Management Agency (DMA) said if it gets enough support, it intends to make losses binding on all holders of these bonds and said the offer was the best deal they would get, echoing comments by Finance Minister Evangelos Venizelos to Reuters on Monday.

Investors will lose almost three-quarters of the value of their debt in the exchange.

Analysts said an Institute of International Finance document, marked IIF Staff Note: Confidential, seemed designed to alarm investors into participating in the exchange.

There are some very important and damaging ramifications that would result from a disorderly default on Greek government debt, the IIF said in the February 18 document obtained by Reuters.

It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed 1 trillion euros.

If Greece misses the March 20 payment without a deal in place, this would be seen as a disorderly default and could be taken as a sign that politicians have lost control of the euro. Investors might then target other weak euro zone countries.

Spain and Italy might require 350 billion euros in outside support to contain the fallout, the IIF said, while the cost of helping Ireland and Portugal could total 380 billion euros over five years.

If the deal fell apart, the European Central Bank would suffer substantial losses because its estimated 177 billion euro exposure to Greece is over 200 percent of its capital base, the IIF said.

The bank lobby group, which helped negotiate the swap on behalf of creditors, also said bank recapitalisation costs could easily hit 160 billion euros if no swap is agreed.

It could threaten the euro and would be a catastrophe for Greek living standards.

Social strains (in Greece) would intensify as the economy reeled and unemployment surged from an elevated level already in excess of 20 percent, the report said.

When combined with the strong likelihood that a disorderly Greek default would lead to the hurried exit of Greece from the euro area, this financial shock to the ECB could raise significant stability issues about the monetary union.

JITTERS

Greece hopes the exchange will mark a turning point as it enters a fifth year of recession.

With the successful completion of the bond swap, we will begin a new chapter for our country, central bank chief George Provopoulos said on Tuesday.

Greek banks, holding 40-45 billion euros of the sovereign bonds, will all take part in the offer, banking sources said. State-run pension funds are also expected to sign up, despite opposition from some labour unions.

Nine more major Greek bondholders, all on the IIF steering committee that helped draw up the deal, said on Monday they would support the swap.

The Greek banks and other steering group members hold about 30 percent of the 206 billion euros of bonds in circulation.

The remaining investors are under pressure to sign up.

Greece wants a take-up of 90 percent or more, and if it falls below that but exceeds 75 percent it is expected to use collective action clauses (CACs) to force losses on all. It could trigger CACs on Greek law bonds, which account for 177 billion euros of the total, with two-thirds acceptance.

Below that level, the deal could be off, potentially plunging the euro zone back into crisis.

The Greek finance ministry denied speculation that it was planning to extend the deadline on the offer, highlighting the jittery mood just two days before final decisions are due.

Obviously the report is written on a worst-case basis to try and encourage participation in the exchange, said Gary Jenkins, analyst at Swordfish Research.

The most likely outcome may well be that Greece passes its 75 percent target and then uses CACs to ensnare the remainder.

Greece needs to reach that target to ensure it makes the budget savings agreed under its 130 billion euro bailout deal.

Venizelos has said he would not hesitate to activate the CACs. The DMA confirmed the warning after meeting members of the German banking industry in Frankfurt.

Using the CACs would probably trigger payouts on bond insurance contracts (CDS) and would also increase the chance of hedge funds or other bondholders pursuing legal action.

Complicating the process is the fact that most of the bonds fall under Greek law, but the remainder are under English law.

The deadline for acceptances is 2000 GMT on Thursday, although the foreign law bondholders must hold approval meetings March 27-29 so they would settle at a later date.

(Additional reporting by Harry Papachristou and Deepa Babington in Athens; Writing by Steve Slater; Editing by Mike Peacock and Anna Willard)