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Greece's new currency would be 'rubbish': Citi's Buiter

There would be "havoc" if Greece left the euro zone and adopted an alternative currency, Willem Buiter, global chief economist at Citi, told CNBC.

"I really think the notion that Greece exits with or without a shadow currency or a proper currency (is ridiculous). Greece has not, historically, been good at managing an independent currency. This time, if they were to move towards that from a situation of extreme weakness it would be havoc for Greece so I wouldn't recommend that."

Asked whether Greece could exit the 19-country single currency group with some kind of alternative currency tied to the euro, Buiter rebuffed the notion, saying "that would be rubbish."

Read MoreWhat would a Greek default look like?

Willem Buiter
Mandel Ngan | AFP | Getty Images
Willem Buiter

The comments by Buiter – a Citi economist believed to have been the first to have coined the now well-known phrase "Grexit" (alluding to a Greek exit from the euro zone) -- come as negotiations between Greece and its international lenders and euro zone partners over reforms, aid and the future of the country's international bailout program, drag on.

Greece was given a four-month extensions to its bailout program in February in order for its new left-wing government to implement reforms, but it has been slow to do so, reluctant to impose more austerity on the Greek public. Particular sticking points have been labor market and pension reforms.

Wrangling over reforms has wasted time, however, and now Greece is running out of money.

There was hope that a deal over reforms could see a last tranche of bailout aid, worth a crucial 7.2 billion euros, released to Greece.

But now hopes are running out before Athens has to make big loan repayments in June to the International Monetary Fund (IMF) and European Central Bank (ECB), which holds maturing Greek bonds.

Read More'High likelihood' of Greek capital controls: Moody's

As crunch time approaches, Greece has yet again been one of the hot topics at a summit of European Union (EU) officials in Riga, Latvia, on Thursday.

On Thursday and Friday, the German and French leaders, Francois Hollande and Angela Merkel, met with Greek Prime Minister Alexis Tsipras on and urged him to work with lenders to find a solution, according to Reuters.

Speaking to reporters at the summit, Merkel said the chat with Tsipras was "a very friendly, constructive exchange, but it's also clear that there must be more work with the three institutions. There is a lot to do."

Buiter agreed that some kind of deal had to be "concocted" in the next few weeks "because it looks likely that Greece is simply going to run out of money sometime in June and won't be able to pay its domestic bills and its foreign creditors."

Read MoreGreece 'in crisis' as officials insist deal is near

However, he believed a default on its debts would "not be the end of the world."

"A default would of course be serious for Greece and it would cause a re-awakening of sovereign fears throughout the periphery of the euro area but it's not the beginning of a Grexit necessarily."

He believed that Greece would stay in the euro zone and should "have serious debt restructuring and serious structural reform in Greece."

"There is a point at which Greece has to become serious about structural reforms," he said.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld