Euro Zone “Far from Having a Solution,” Says Rogoff

The European sovereign debt crisis is likely to get considerably worse before a sustainable recovery may develop, according to noted economist Ken Rogoff.

At the 2012 World Economic Forum in Davos, Switzerland, Rogoff stated in a CNBC interview that “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.”

“They’re printing money but that doesn’t work,” Rogoff added. “I think they’re printing money and buying time and that can work for a while although it leads to an uglier end-game.”

Although the European Central Bank (ECB) is not explicity printing money, many economists consider its longer-term refinancing operation (LTRO) as a more of quantitative easing.  Under the plan, the ECB is able to offer unlimited loans for up to three years at a record-low interest rate of 1%.

Rogoff – an economics professor at Harvard, a former chief economist at the International Monetary Fund (IMF), and author of This Time is Different - is considered to be one of the world’s foremost experts on sovereign debt crises.

With regard to the global economy, Rogoff contended that “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.”