Europe's banks, sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, are facing a wave of losses if Greece abandons the euro.

While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal, investors say. Even with more than two years of preparation, banks still are at risk of deposit flight and rising defaults in other indebted euro nations.

"A Greek exit would be a Pandora's box," said Jacques- Pascal Porta, who helps manage $570 million at Ofi Gestion Privee in Paris, including shares in Deutsche Bank AG (DBK) and BNP Paribas SA. (BNP) "It's a disaster that would leave the door open to other disasters. The euro's credibility will be weakened, and it would set a precedent: Why couldn't an exit happen for Spain, for Italy, and even for France?"

The prospect of Greece leaving the 17-nation euro region increased after parties opposed to the terms of the nation's second bailout by the European Union and the International Monetary Fund won most of the votes in May 6 elections. A fresh round of voting will be held June 17 after politicians failed to form a government. For the first time since the crisis began in November 2009, European leaders and central bankers are speaking openly of Greece abandoning the currency union.

David Fuller's view No one yet knows whether or not Greece will leave the euro, not even the Greeks and certainly not the Germans. However, we have a much clearer idea of what the markets are doing.

Stock markets, in their usual manner, are in the process of discounting a worst case scenario as is the nature of crowds. In this instance they are worrying about a Greek default which is disorderly and leans on Spain's much more important domino in the process.

Naturally this is conjecture on my part but just look at the media - everything is focussed on the consequences of a euro break up, and sooner rather than later. Also, look at the technical action which is now in a climactic phase, evidenced by a steep decline in Europe (weekly & daily) and a number of other markets around the globe.

In markets, stuff happens - plenty of it, but how many actual worst case outcomes can you recall? History's lesson is that markets overshoot, in both directions.

I cannot tell you that the euro will not break up, because that is unknowable at this stage although everyone has a view on this subject and it is currently bearish regarding the single currency's survival prospects. Meanwhile, another European summit is taking place this evening. Greece may be expendable but the political resolve to ring fence Spain and other countries in deep recession appears as strong as ever. This cannot be done without economic growth and the political tide in Europe appears to be shifting in French President Francois Hollande's favour.

Whatever happens to the euro, and I think it will weaken further, Europe will still be there doing business, as Warren Buffett said recently. There is some good value in European equities and even some performance. My thanks to colleague Jackson Wong for pointing out Impregilo a diversified Italian construction company which derives a majority of its revenue from outside the Eurozone. It yields 2.89%, has an estimated PER of 16.3 and P/B of 0.98.