Larry Summers: The euro failed to live up to goals

Larry Summers at 2015 WEF in Davos, Switzerland.
David A. Grogan | CNBC
Larry Summers at 2015 WEF in Davos, Switzerland.

Former Clinton Treasury Secretary Larry Summers told CNBC on Wednesday that breaking up the euro zone would be a "serious mistake" but the single currency has not lived up to the hype.

The architects of the euro failed to realize that participating countries needed to be tied closer together, he said on CNBC's "Squawk Box" from the World Economic Forum in Davos, Switzerland.

The monetary union needed to be associated with "much greater cooperation in fiscal policy ... financial regulation ... in standing behind banks," the former Obama advisor said. "They let the politics trump the economics and they're paying the price for that now."

On the U.S. economy, Summers said middle-class incomes have not kept pace with the recovery.

Growth needs to be equally distributed, he said, "so we have a 'race to the top' rather than 'race to the bottom' when it comes to questions like taxation and regulation."

Bringing along the middle class was a major theme of President Barack Obama's State of the Union address Tuesday night. The president takes his message on the road Wednesday, delivering remarks in Idaho, after asking lawmakers for a broad package of tax and other reforms.

But with the GOP now in control of both houses of Congress, freshman Sen. Joni Ernst of Iowa—delivering her party's response Tuesday night—rejected Obama's policies.