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More austerity could tip Greece 'over the edge': Economist

More spending cuts could tip Greece over the edge and out of the euro zone, economist and business analyst Vicky Pryce told CNBC on Tuesday.

"If you look at what Greece is going through now, more cuts and more austerity will tip them over the edge I think," Pryce said.

Greek-born Pryce, who moved to England as a teenager, is the author of a 2012 book on Greece entitled "Greekonomics". Her comments on Tuesday came after the Greek government forecast this month that the country would post a budget surplus before interest payments this year, for the first time in over a decade, and would exit six years of recession in 2014.

Since 2010, Greece has received two 240 billion euro ($325 billion) loans from international lenders, which were conditional on the Greek government imposing tough austerity measures, including widespread spending cuts and tax hikes. Meanwhile, Greece faces the highest unemployment rate in the euro zone, with one out of every two young people without a job.

Nonetheless, the Greek government predicted in its 2014 draft budget that the economy would grow by 0.6 percent next year, thanks to a rebound in investment and exports, including tourism.

(Read more: Greece's problems are still Germany's problems)

"The interesting thing for Greece right now is that it shows signs of improvement," Pryce said. "We're moving towards a primary surplus and the economy's beginning to at least drop a lot less fast than before, particularly as tourism was so good last summer."

But she added that Greece's enforced austerity at the behest of lenders was akin to a prison sentence -- something she'd know about, given her two-month stint in prison this year for perverting the course of justice.

(Read more: UK jails uneconomic: economist and ex-prisoner)

Rather than more "punishment" for Greece in the form of further cuts, she said Greece needed measures to resurrect economic development and growth.

"In terms of output, Greece is still about 20 percent less than it was before the recession, so what it needs now is to encourage that development. You need to encourage money and investment to come into the country, you need to change confidence, which is just starting to improve," she said.

Pryce acknowledged that Greece -- like Portugal and Ireland -- had been given extra time to meet fiscal consolidation targets, but said that more still needed to be done to help the country.

(Read more: Don't bet on Greece's exit from recession: Business leader)

"There is still that debt overhang and in my view, we still need the haircuts to be taken by the sovereigns who hold Greek debt, including I'm afraid the ECB (European Central Bank) itself, which is the main lender to Greece at present," she said.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

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