A Greek exit from the euro zone could trigger a global economic crisis of dire proportions and must be avoided at all costs, a respected German think tank said in a study published on Wednesday.

Chancellor Angela Merkel's centre-right government has strongly criticized Greece's repeated failure to meet tough fiscal targets since its debt crisis erupted in late 2009 but has recently stressed it wants Athens to stay in the euro zone.

Merkel, who was met with large protests by austerity-weary Greeks during a trip to Athens last week, has praised the efforts of Greece's new government to put the public finances in order, though she also says much remains to be done.

"A Greek exit from the euro carries the risk of a European and even international conflagration and could trigger a global economic crisis," Bertelsmann Foundation said, citing the study it commissioned from Prognos AG.

Greece's departure would entail costs for the country, already in its fifth year of recession, totaling 164 billion euros, or 14,300 euros per capita, until 2020, said the study, which ran a cost analysis of various scenarios.

A 'Grexit' would create pressure for the other heavily indebted southern European countries - Portugal, Spain and even Italy - to leave the common currency, a development that it said would threaten "a dramatic international recession".

"The 42 most important economies would suffer total economic losses of 17.2 trillion euros (in that worst case scenario)," the think tank said.

"In the current situation now we absolutely have to prevent the eruption of a conflagration," said Aart de Geus, chairman of Bertelsmann Foundation.

Financial market concerns about a possible meltdown of the euro zone have eased considerably since the European Central Bank announced it was ready to buy unlimited amounts of debt issued by weaker countries to reduce their borrowing costs.

Other factors such as the launch of the euro zone's permanent bailout fund have also helped to steady investors' nerves but Greece still remains in a very weak situation and economists say it will need another debt restructuring.

International lenders are still struggling to reach agreement with Prime Minister Antonis Samaras's government on further reforms and austerity measures as a precondition for the payment of the next tranche from its 130-billion-euro bailout.

On Tuesday, the labor minister and the lenders briefly suspended their talks due to disagreement over labor reforms intended to make Greece more competitive.

EU leaders will discuss plans to bolster the euro zone with a banking and fiscal union at a two-day summit this week. A senior German government official said on Wednesday he did not expect a substantial discussion about Greece at this summit. (Reporting by Gareth Jones; Editing by Noah Barkin)