Exiting the euro would throw Greece's banking system into chaos. Lenders would panic over the prospect of being repaid not in euros but in drachmas of dubious value. Adopting a suddenly much weaker currency could also ignite Greek inflation because prices of imported goods would soar.
International investors would be reluctant to lend to Greece's government, its companies or its banks. The freeze-up in credit could cause a depression, worse than what Greece is suffering now. Economists at UBS estimate that Greece's economy would shrink by up to 50 percent if it left the eurozone.
The pain would also likely spread as European banks absorbed losses on their loans to Greece. The worst-case scenario: A disaster akin to what followed Lehman Brothers' collapse in September 2008. Banks grew too fearful to lend to each other. Credit froze worldwide.
Some economists would like to see European governments produce a rescue package that pairs government cuts and reforms with economic aid designed to spur growth in Greece.
"When you have over 20 percent unemployment, you need to do something," Papadimitriou says.
He wants European countries to propose something like the U.S. aid plan that rescued an impoverished Europe after World War II.
"You need something similar to the Marshall Plan," Papadimitriou says.
Rexrode reported from New York. Associated Press Writer Derek Gatopoulos contributed to this report from Athens.
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