Europe Economy

Greece Is 'Dead Wood' in Euro Zone: Fund Manager

Greece should leave the euro zone in order to prevent the sovereign debt crisis engulfing major economies and threatening its very existence, a fund manager told CNBC.

"We need to move on from the dead wood in the euro zone because it is that dead wood which potentially is going to infect the whole piece," Henry Dixon fund manager at Matterley Asset Management told CNBC Tuesday.

"We have a chance now to contain it at Greece, maybe Portugal. Ireland has done a great job in dealing with its crisis. It's telling that there has been very little rhetoric about Greece," he said.

He added that the opportunity existed now to stem the contagion because the alternative would be that the sums would get really vast if Italy and Spain get brought into the picture.

"Greece accounts for around 5 percent of euro zone debt outstanding but that bad 5 percent is at risk of bringing down the whole house. Italy accounts for around 20 percent, much the same in Spain," Dixon said.

In response to reports that the Italian government had held talks with the Chinese sovereign wealth fund, Dixon said China knows the importance of Italy and Spain to the euro zone economy.

This downbeat view of Greece has been echoed by a number of analysts and market commentators in recent weeks despite comments by Germany's finance minister, Wolfgang Schaeuble that there would be no exit of Greece from the euro.

Chris Scicluna, deputy head of economics at Daiwa Capital Markets told CNBC that Greece cannot cope with more austerity and needs aggressive debt restructuring.

He said giving Greece the next tranche of EU aid would stall the crisis temporarily.

"We would not be surprised to see things coming apart before the end of the year, resulting in an eventual sizeable writedown of Greek government debt," Scicluna said.