The debt burdens of many Western industrialised nations have risen enormously during the economic and financial crisis due to bank bail-outs and economic packages. Now a debt crisis is looming. Many countries are no longer able to obtain funding in the capital market and the central banks are stepping into the breach as the lender of last resort. How do you as an economist view this paradigm shift where central banks are suddenly buying massive amounts of government bonds from ailing states?
Prof. Dr. Cocca: It is a declaration of bankruptcy. It shows that in reality the system is already no longer self-sustaining. Without the (highly problematic) intervention of the ECB, many euro countries would already no longer be able to tap the capital markets which would mean that today these countries would already be insolvent. The measures taken by the ECB are also putting the stability of the central bank itself on the line by taking the risks of highly indebted countries onto its balance sheet. Moreover, it robs the ECB of its greatest weapon: its independence.