Paul Krugman says Cyprus needs the abandon the euro immediately in order to save its economy.
"Cyprus should leave the euro. Now," the Nobel Prize-winning economist wrote in a blog post on Tuesday.
The New York Times columnist wrote that starting a new, cheaper currency would allow Cyprus' economy to recover more quickly. Meanwhile, he wrote, Cyprus' economy might shrink as much as 20 percent if it stays in the eurozone. That's because Cyprus' days as an offshore tax haven are likely over, and the eurozone plans to force the government to implement steep budget cuts, which would hurt the economy, Krugman wrote.
Krugman is not alone in arguing that Cyprus is about to suffer major economic damage. Hari Tsoukas, a professor at Warwick Business School, said in a statement Tuesday that Cyprus' unemployment rate "is likely to at least double" to up to 30 percent. And Peter Morici, a professor at the University of Maryland's business school, said in an op-ed in The Street Monday that Cyprus should leave the eurozone, arguing that Cyprus' economy currently is on the path toward collapse.
Cyprus reached a last-minute bailout agreement Monday that will impose losses on big deposits in Cyprus' two largest banks, shut down Cyprus' second-largest bank and bar people from moving funds out of the country.
It is unclear whether Cyprus will decide to ditch the collective currency. Nicholas Papadopoulos, head of Cyprus' parliament's finance committee, told Bloomberg TV Monday that leaving the eurozone is "a valid point that has to be explored." But Cyprus finance minister Michael Sarris told Bloomberg TV on Tuesday that "it would be catastrophic to even talk or entertain the idea."