EFSF Expansion Only a Short-Term Fix: Ex-Fed VP

The German Parliament's vote to expand the role of the European Financial Stability Facility (EFSF) has given the markets a "confidence boost," but it is only a short-term fix to Europe's solvency issues, Dino Kos told CNBC Thursday.

EU building flags brussels
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EU building flags brussels

"There were questions about whether Europe would stop bickering and get behind a plan to stabilize the sovereign [debt] situation," said the Hamiltonian Associates managing director and former New York Federal Reserve executive vice president. The German vote provided "a nice boostand removes some of the uncertainty that the market had."

But expanding the EFSF, as the European bailout fund is known, "doesn't solve the underlying problem," he said.

"You have countries in the periphery of Europe that are going to need more money, claims will have to be written down, and the banks that own those bonds will be taking a hit at some point. Those banks are still undercapitalized," said Kos. "But the immediate threat has been pushed back."

That could create another problem, he said.

Presuming Greece gets its next tranch of funding of approximately $8 billion, "by November they're going to be out of money again" and the question is whether the troika of the European Central Bank, European Union, and International Monetary Fund will "give Greece the next batch of money," Kos said.

At the same time, in the U.S., the congressional "super committee" charged with finding ways of cutting trillions of dollars to close the budget deficit must do so by November.

"So there'll be action on both sides of the Atlantic," Kos said,adding that, like the Chinese curse about living in interesting times, "it may get a little too interesting."