The euro zone is nowhere near finding a solution to the debt crisis plaguing it and needs deep restructuring as well as a new constitution as part of an effective long-term remedy as printing money will not solve its problems, Kenneth Rogoff, Professor at Harvard University told CNBC on Wednesday.
Rogoff said he expected to see a slow and precarious global economic recovery, with “ground zero” Europe posing the greatest risk.
"They’re printing money but that doesn’t work," Rogoff said. "I think they’re printing money and buying time and that can work for a while although it leads to an uglier end-game."
The European Central Bank has come under pressure to print money, as the Federal Reserve and the Bank of England have done, to ease the crisis.
Although the EU treaty forbids the ECB to print new money to buy up government debt, many economists regard its recent longer-term refinancing operation to banks as an example of indirect money printing.
In December, the ECB offered unlimited loans to banks for a 3-year period at its record low 1 percent interest rate and another such operation will take place in February.
Rogoff stressed that money printing by the ECB was not a sustainable solution, as euro zone governments ultimately own the central bank's balance sheet.
“They are so far from having a solution in Europe. They need a new constitution. They need deep restructuring. This is not just about Greece. It’s way deeper than that,” Rogoff said.
Turning to the outlook for the rest of the world, Rogoff said it was “not as dark as it was over the summer”, but that the global economy faced significant headwinds.
“The U.S. has some positive growth,” he said. “That’s not enough to help the employment a lot but it’s a lot better than where Europe is.”
The International Monetary Fund on Tuesday revised its global growth forecastsdown on Tuesday, saying it saw global activity decelerating but not collapsing.
It cut its forecast for 2012 global growth by 0.7 percent to 3.3 percent.
“It’s very slow and dangerous with Europe being ground zero but China could have problems. The United States doesn’t live in an island so it’s a year of sub-par growth,” Rogoff said. “The International Monetary Fund, which really strikingly downgraded its forecasts, is probably a lagging indicator,“ he added.
