"I personally believe there's no chance for Greece to become competitive [while] in the eurozone," Hans-Werner Sinn, president of Ifo, said in a luncheon speech in New York on Monday.
"If Greece is kept in the eurozone, there will be ongoing mass unemployment. But if they exit, they will see a very sudden recovery," he said, as lower prices boost competitiveness.
He also cited risks of other indebted eurozone countries facing severe spending cuts and tax hikes.
"Cutting wages and prices to the extent necessary in some southern European countries is impossible, whatever the politicians say," Sinn said. "Policy is unable to overcome the laws of economics."
Greece has received more than €100bn in aid since its debt crisis began, and last month creditors agreed to trade their Greek bonds for lower-valued securities.