Hans-Werner Sinn says this reform, along with restricting the freedom of movement and inclusion of migrants into welfare states, is of vital importance.
He said if the EU is to survive, leaders need to implement four important reforms – including a temporary halt on using the euro.
And, those member states who do not comply, should be forced to leave the European Union in the worst case.
Mr Werner-Sinn wrote in a column in German newspaper Wirtschafts Worts: “Some countries of the eurozone are hard hit by the euro because they can no longer devalue.
“They have been suffering for many years from mass unemployment and a lasting deterioration of their industries.
Hans-Werner Sinn, says that another way to rebuild Europe, is to restrict the freedom of migrants
“These countries should be given the possibility of an orderly exit from the euro as well as a depreciation, combined with the right to return to the monetary union after a recovery of the economy.”
And he argues that, while there is no question the Treaty of Rome, signed on 25 March 1957, brought Europe peace and prosperity for decades it must be updated to handle today's challenges.
He said: “The Maastricht Treaty, 1992 and the Lisbon Treaty, 2007, with the euro and the rules on freedom of movement and social integration, have resulted in systems of redistribution and community liability which have led to abuse.
“These have now created an imbalance that can destroy the EU. The exit of the British from the EU and the continuing industrial deaths in southern Europe are visible consequences of carelessness. “
He argues that in order to stabilise the Union, the EU treaties urgently need to be amended.
Hans-Werner Sinn wants the Euro to be scrapped temporarily
He said: “Freedom of movement, social status and the inclusion of migrants in the welfare state form an indissoluble trilemma.
Mr Werner Sinn believes that the welfare state develops a magnetic effect, which destroys it if policy does not restrict freedom of movement or inclusion.
He advises it would be useful to separate between acquired social benefits to be provided by the host countries and the inherited social benefits for which the respective EU home countries are responsible.
He writes that the acquired benefits would include unemployment insurance and pension insurance.
He said: “Tax-financed social benefits such as housing allowances, social assistance or child allowance would, on the other hand, be inherited claims.
“This separation would prevent the run-off of immigrants to better developed social states, ensure the supply for the needy in principle and maintain freedom of movement.”
The economist also wants to see migration curbed
Mr Werner Sinns offers other solutions on reforming Europe. He wants to create a bankruptcy regulation for states.
He argues that “purchasers of state securities must not be allowed to be saved by taxpayers from other countries in the event of a crisis”.
He said: “With such a bankruptcy regime, investors would have given much less credit to today's crisis-ridden eurozone countries.”
The measures on bankruptcy would require the exit from the euro, in order to restore competitiveness through devaluation.
He would also like to see an overhaul of the central banking system as its debts are rising.
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He writes: “The Central Bank alone has had to credit uncovered net remittances of €814 billion for other eurozone countries.
“This corresponds to about half of the German net foreign assets. The target loans finance current and past current account deficits of other countries.
“They turn Germany into the land of milk and honey, where you can take on credit as much as you want, without the acceleration of the due.
“Here, a time bomb is ticking… In the case of a reform, we should look at the Twelve District Banknotes of the US and create a system that prescribes an annual repayment of the target balances. This could be offset by gold – as was the case in the US until 1975.”