Grexit may be better for Greece: Euro architect

A woman walks past an Alpha Bank ATM and a shopping window announcing sales in central Athens, July 21, 2015.
Yiannis Kourtoglou | Reuters
A woman walks past an Alpha Bank ATM and a shopping window announcing sales in central Athens, July 21, 2015.

Leaving the euro might help struggling Greece, according to Otmar Issing, the former European Central Bank (ECB) board member and chief economist who is known as one of the euro currency's architects.

"The euro is irreversible – but if it is irreversible for every country has become an open question," Issing told CNBC on Tuesday.

Issing raised eyebrows earlier this summer when he said that the euro's irreversibility was an "illusion," contradicting current ECB members who have insisted that there is no going back from the single currency.

However, economists and politicians away from the ECB have questioned whether highly indebted Greece can remain in the euro zone and whether it might in fact do better economically outside the currency union.

"For Greece, there are very good arguments that it would do well outside the euro area for some time to come, but it all depends on the Greek government's reactions" Issing told CNBC.

Greece has just begun a third much-needed bailout, after months of negotiations, which looked like they might result in a disorderly exit from the single currency region.

Since then, China has replaced Greece as the economy causing most worry to the global financial system.

Issing, who is currently president of the Center for Financial Studies at Goethe University, spoke of the "high degree of uncertainty" that remains and forecast an era of "moderate growth but not stagnation."

"We are heading for a time of high uncertainty in which governments still have many measures in hand to sustain the situation," he said.

He cautioned the ECB, which meets later this week, against any further extension of its quantitative easing program, arguing that the "danger of creating bubbles in fixed income markets" outweighed any advantages.

- By CNBC's Catherine Boyle