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Economist Mundell: Odds of Greek Euro Exit 25%

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BEIJING--The euro is still a great success so far and the currency won't collapse even if Greece exits the euro zone, Nobel Prize-winning economist Robert Mundell said Saturday.

There is a 25% chance of Greece leaving, Mr. Mundell, known as the father of the euro, told reporters on the sidelines of a forum in Beijing.

Governments in Europe should take responsibilities to reduce deficits and contain their own problem, and Greece should make structural adjustments to reform its labor market and increase taxes as ways to get it out of trouble, Mr. Mundell said.

He suggested China depreciate its currency against the U.S. dollar if Greece exists the euro zone.

Mr. Mundell also said it would be a mistake for the Hong Kong authorities to depeg the Hong Kong dollar against the U.S. dollar.

"Fixing to a basket of currencies has never been successful or credible," he said.

Former Hong Kong central banker Joseph Yam on Tuesday suggested three ways to change the city's exchange-rate system, should authorities decide to consider tinkering with the currency regime some time in the future. One of them includes turning the exchange rate system into a corridor against the U.S. dollar, Chinese yuan or an undisclosed basket of currencies.

Hong Kong's government pegged the local currency at HK$7.80 to the U.S. dollar in 1983, partly to boost confidence ahead of the city's 1997 handover to Chinese rule. Mr. Yam was involved in the establishment of the peg.

 

Write to Grace Zhu at grace.zhu@dowjones.com

 

(END) Dow Jones Newswires

June 16, 2012 00:35 ET (04:35 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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