Nobel Prize-winning economist Joseph Stiglitz told CNBC on Monday that the euro zone should stay together but if it breaks apart, it would be better for Germany to leave than for Greece.

"While it was an experiment to bring them together, nothing has divided Europe as much as the euro," Stiglitz said in a "Squawk Box" interview.



The risk of a sovereign default in Greece has increased after the anti-austerity party Syriza won Sunday's snap elections, raising concerns over the possibility of a Greek exit from the euro zone.

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Greece is not the only economy struggling under the euro, and that's why a new approach is needed, Stiglitz said. "The policies that Europe has foisted on Greece just have not worked and that's true of Spain and other countries."

The Columbia University professor is one of 18 prominent economists who co-authored a letter saying that Europe would benefit from giving Greece a fresh start through debt reduction and a further conditional extension in the grace period. But in the letter in the Financial Times last week, they stressed that Greece would also have to carry out reforms.

"Greece made a few mistakes ... but Europe made even bigger mistakes," Stiglitz told CNBC. "The medicine they gave was poisonous. It led the debt to grow up and the economy to go down."

"If Greece leaves, I think Greece will actually do better. ... There will be a period of adjustment. But Greece will start to grow," he said. "If that happens, you going to see Spain and Portugal, they've been giving us this toxic medicine and there's an alternative course."

Insisting that it's best for Europe and the world to keep the euro intact, he argued that keeping the single currency together requires more integration. "There's a whole set of an unfinished economic agenda which most economists agree on, except Germany doesn't."



He said the real problem is Germany, which has benefited greatly under the euro. "Most economists are saying the best solution for Europe, if it's going to break up, is for Germany to leave. The mark would raise, the German economy would be dampened."

Under that scenario, Germany would find out just how much it needs the euro to stay together, he added, and possibly be more willing to help out the countries that are struggling. "The hope was, by having a shared currency, they would grow together." But he said that should work both ways.