Greece may have restructured its private debts, and the European Central Bank has pumped liquidity into its banking system, but such measures plug leaks and don't repair underlying damage, meaning the worst is yet to come for Europe, says Willem Buiter, chief economist at Citigroup.
Greece recently restructured its debts with private creditors, avoiding a messy sovereign default.
The European Central Bank has made easy loans available to banks, a liquidity-injecting measure known as a long-term refinancing operation.
Both are quick fixes.
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"We have really just paused for breath," Buiter tells CNBC.
"It (the long-term refinancing operation) really hasn’t solved the problem, and for Europe the worst is still to come."
Slow growth or even recession in many parts of Europe exacerbated by high unemployment and flawed fiscal and labor policies will take a while to fix.
And while Greece can relax for now, other European countries will grab the spotlight.
"There will be a further restructuring of Greece and Portugal, Ireland is at risk, and Spain has been deteriorating spectacularly in the recent past in terms of its public finances," Buiter warns.
Fed Chairman Ben Bernanke has said the European debt crisis has abated but warns that U.S. money market funds still remain vulnerable should the crisis rekindle.
"Europe's financial and economic situation remains difficult, and it is critical that the European leaders follow through on their policy commitments to ensure a lasting stabilization," Bernanke said in remarks prepared for the House Committee on Oversight and Government Reform.
"U.S. financial firms and money market funds have had time to adjust their exposures and hedge their risks to some degree as the European situation has evolved, but the risks of contagion remain a concern for both these institutions and their supervisors and regulators."
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