If you are planning a trip to Europe, you may be treated to a curious sight at the airport you arrive at: people holding up their freshly obtained euro notes against the light.

Towers Watson resident fixed income expert Ed Britton has seen people do it.

They're not looking for fakes; they are looking to see which central bank has issued the notes.

With the expectancy rate of a Greek default moving up to 98 per cent, the question is not if, but when.

And although theoretically euro notes issued by the Greek central bank should remain valid, people fear it will not play out that way.

"That percentage tells you [a Greek default] will happen," Britton says.

"It is obviously a political decision. If Greece defaults, it will impact on the strong countries as well."

When it happens, it won't be called a default, but a default it will be.

This means banks in stronger European economies, such as France, will have to recognise these debts on their balance sheets, as far as they haven't already done so.

"The best scenario is that a default does happen, but in an orderly fashion and a long time away," Britton says.

The worst-case scenario is truly horrendous.

"If Greece goes, then most likely Portugal goes as well. The big question is: 'What will happen to Spain?' The exposure of the European banks to Spain is too high to survive," Britton says.

"Now, that is a nightmare scenario, but that doesn't mean it won't happen."

Newedge corporate credit sales senior director Lawrence McDonald, a former vice president of distressed debt and convertible securities trading at Lehman Brothers, argues the potential depths of a new crisis should justify more dramatic measures.

"What is needed is a globally-coordinated effort to set up a fund that buys up high-yield government debt, and give the banks a grace period of say two years to mark to market," McDonald says.

"Nobody knows where it is going, but the worst-case scenario is a 1914 type of breakdown, which led to a disintegration of both the financial system and peace."

McDonald points out that International Monetary Fund head Christine Lagarde has already made comments about the need for a unified approach, while China's talks with Italy to buy its bonds demonstrate there is appetite for the debt.

Australian institutional investors hold relatively low levels of fixed interest compared to their European counterparts and most of that is in corporate debt, not sovereign debt.

So the direct impact of European sovereign defaults on their portfolios should be limited.

But the systemic risks of a series of sovereign defaults are hard to forecast.

Buckle up and hold onto your seats, because we may be in for a bumpy ride.