As European leaders ready themselves for another summit on the euro zone crisis, one economist said that the critical situation in Greece should be dealt with by focusing on growth instead of debt.
"The focus on the level of debt is perhaps not the right focus," Michala Marcussen, global head of economics at Societe Generale, told CNBC Tuesday. "The real focus is how to get Greece into a situation where the economy can grow again, where they can work through the structural issues and break this cycle where Greece misses targets, promises more austerity and has even weaker growth."
Marcussen warned that a60 percent haircuton Greek debt might not be enough.
"To reduce Greek debt below 100 percent of GDP, you would need a haircut of 90-100 percent," she said.
Greece, which has the euro zone's highest debt-to-GDP ratio, has become a catalyst for much of the turmoil that has hit markets in recent months. Simultaneously, its politicians face increasing political unrest over unpopular austerity measures.
A meeting of European Union leaders on Wednesday is expected to deliver an "insurance model" for the European Financial Stability Facility (EFSF), a hefty “voluntary” haircut on Greek debt, and substantial bank recapitalization.
"The challenge here is financial stress," said Marcussen. "I think financial stress is exerting a drag on the economy of 1.5-2 percentage points of GDP."
She believes that if the financial stress is not tackled, there will "clearly" be a recession around the world, not just in the euro zone.
Domenico Crapanzo, head of European rates at Jeffries, warned that investors may "rush to press the sell button" after Wednesday's summit.
"Forget recession. The combination of a strong currency, high interest rates and fiscal austerity are likely to push Southern Europe straight into depression," he told CNBC.