Interview with Prof. Dr. Teodoro Cocca: “The system is already no longer self-sustaining“

Teo Cocca W28950 b 635

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.

Inflationary pressure has intensified globally since the beginning of this year. Do you think inflation can still be avoided or is it perhaps actually desired by countries in order to find a way out of debt?

Prof. Dr. Cocca: The next big crisis could come from the inflation side. In the short term inflation risks have eased substantially because of the economic slowdown. However, in the long term it seems unthinkable to me that printing money on a massive scale will not lead to any inflation at all. As meanwhile the central banks directly involved also have an interest in facilitating a soft debt reduction process for debtors via inflation, this begs the question of who actually has an interest in rigorously combating inflation. The biggest losers here could be savers who would see their savings melt away.

While governments in Europe have tended to adopt the austerity approach in order to reduce budget deficits and sovereign debt, the USA is continuing to use state aid (stimulus) to kick-start the economy and bring unemployment down to a tolerable level. Which route do you find more appropriate, the European or the American one?

Prof. Dr. Cocca: There is a major difference here. This option is still open to the USA as the capital market is still unreservedly willing to buy US debt securities whatever the Americans decide. This is not the case in the eurozone. The market would have no confidence in a further increase in sovereign debt. Europe has no choice: it needs clear structural reforms to strengthen growth and competitiveness, as well as a disciplined austerity policy.

The European Union is currently working hard to save the common European currency. After Greece, Portugal and Ireland, the capital markets have now turned the spotlight on much bigger countries with the result that in the past few weeks there has been a huge increase in debt interest charges and credit default insurance (CDS) for less solvent EU countries such as Italy and Spain. Alan Greenspan, who headed the US central bank for almost 20 years, has predicted the demise of the euro. How do you view the future of the euro from a non-European perspective? Will it be possible to save it or not?

Prof. Dr. Cocca: It is up to the corecountries in the eurozone. If a credible deepening of the common economic and fiscal policy can be achieved swiftly, then it will be possible to save the euro. However, the last few weeks have not been very encouraging in this regard. In addition to the latent economic incompetence of many of the politicians who have voiced comments, the solidarity within the EU is beginning to fade. This is a dangerous development. We need to realise that the euro has never been as imperilled as it is now. It is highly likely that the situation is considerably more strained than we perceive from the outside. Merkel and Sarkozy must agree very quickly on the way forward. Otherwise the market will soon be forced into a completely disorderly, and consequently barely controllable, reaction.

The euro was brought in without a real European government, economic government or fiscal policy authority. Economic and capital market experts say the only way to save the euro is to introduce eurobonds as a solution to the solvency problems of the countries concerned as well as a common economic and fiscal policy. Do you share this opinion, and if so, how likely is it that the politicians in Germany, Finland, the Netherlands and Austria will agree to the creation of a transfer union?

Prof. Dr. Cocca: We already have a “light” version of a transfer union although in its present form it is restricted in terms of amounts and timescales. Well on paper at least. Naturally the de facto situation is that so far the eurozone has clearly been acting as if an implied guarantee were in place for all eurozone countries. In my opinion, Eurobonds are not a solution. In the short term it may be possible to use them to buy some time, but in the long term they just reinforce the principle that caused the crisis in the first place: it would introduce a lack of discipline into government finances in the eurozone for good. What is interesting is the move towards looking at the problem via alternative scenarios as well as at the costs they entail. This is a positive development. The costs of a transfer union need to be compared with those of a sovereign default. Let’s see what this calculation reveals.

Some currencies outside the big currency zones of the euro and the dollar such as the Swiss franc, Canadian dollar, Norwegian krone and Swedish krona have risen sharply in the last  few months. The Swiss central bank recently decided to guarantee a euro exchange rate of 1.20. Can it win the currency war against the capital markets?

Prof. Dr. Cocca: It all depends on how the euro crisis develops. If the crisis worsens severely, the SNB would have to buy a huge amount of euros and keep these on its books. Even the SNB cannot do this for ever. Although there is no restriction on the amount of Swiss francs it can sell in return, at a certain point it would trigger inflation. This would then create risks on the inflation front for the Swiss economy. The danger of an overly strong franc would have been averted, but the economy would still suffer via inflation. It is just not possible to escape a major crisis when you are a small island within Europe surrounded by turmoil. Conversely, if a swift solution is found to the euro crisis, the euro will rise again against the Swiss franc rendering the measures taken by the SNB unnecessary. It would therefore seem that the SNB is using the measure to buy time in the hope that the crisis is resolved within the next few months. But the SNB has given up one thing through this intervention: its independence.

The economy in Europe is slowing, the US economy has never really picked up and the Japanese economy has been in the doldrums for 2 decades. The forecasts for this year and next show dark clouds on the economic horizon. Is a double-dip scenario conceivable, especially as many countries are in austerity mode or having to increase tax revenues because of high debt levels?

Prof. Dr. Cocca: A slowdown in the economy looks unavoidable; the latest figures show this very clearly. However, although a recession is more likely than before, it is not certain. It should be noted that market perception of all indicators and news is very negative at the moment. In panic phases such as now, the market blanks out the good information. This is happening again at the moment. Listed companies are actually continuing to report moderately good prospects, their balance sheets are very sound and the emerging countries are still recording substantial growth.

Various European banks, especially in Greece, Italy and France, have come under pressure in recent weeks as a result of the European sovereign debt crisis. Do you think the governments will still be able to come to the rescue next time there is a banking and financial crisis or did they already lose their political and financial clout in the last crisis?

Prof. Dr. Cocca: It is true that the European governments now have considerably less capital available for rescue operations. This makes the situation today very different to the one in 2008. Consequently it could be trickier this time. But the loss of confidence has probably been even more of a problem. The market no longer believes in the leadership qualities of the top exponents in the USA and Europe. Too many big promises have been made which the politicians have then miserably failed to deliver. The political inability to tackle the crisis is frightening.

The price of gold has rocketed. Today it is worth two and a half times more than it was 2 years ago. Do you believe gold represents a safe haven investment or do you see this as more of a gold bubble?

Prof. Dr. Cocca: At this level, gold only makes sense if you assume the worst.

One final question. Robert Mundell was awarded the Nobel Prize in 1999 for his work on exchange rates and monetary and fiscal policy. According to Mundell, exchange rate fluctuations have at the very least been a contributory factor in many global economic crises (e.g. Asian crisis 1999). For this reason, he advocates the creation of a world currency. A global economy needs a global currency? The first step should be to link the euro and the dol¬ar. Do you think this is a radical idea or a likely trend for the future?

Prof. Dr. Cocca: I can’t see it. After all, Europe’s present experience shows that one currency is only appropriate if the economic development in the corresponding regions is as even as possible. Consequently a global currency would only make sense if there were no regional inequalities. In my opinion, however, this is an illusion. If there is a lesson to be learned from the present crisis, it could be that everyone is ultimately better off with their own currency because that way they retain their autonomy.

Professor Dr. Teodoro Cocca, Vice Chairman of the Board of Directors of GGI

Professor Dr. Teodoro Cocca was elected as a new member of the Board of Directors of VP Bank in Vaduz, Liechtenstein. The VP Bank is one of the three largest banks in the principality of Liechtenstein and specialises in asset management. The Bank has 800 employees in Liechtenstein and eight other countries, and administers client assets worth CHF 41 billion. Professor Dr. Teodoro Cocca is a Professor of Asset Management at the Johannes Kepler University in Linz and Adjunct Professor at the Swiss Finance Institute in Zurich. Prior to that, he worked at Citibank for several years, where he was involved in investment and private banking, conducted research at the Stern School of Business in New York and taught at the Swiss Banking Institute in Zurich. Professor Cocca (38) was born in Switzerland and has Italian roots. He is the Chairman of the annual European Private Banking Summit, which takes place in Zurich, and is an advisor to various finance companies in Switzerland and abroad.


  • Claudio Cocca - Founder and Chairman of the Board of Directors of Geneva Group International – CH
    T +41 44 256 18 18 – This email address is being protected from spambots. You need JavaScript enabled to view it.

GGI Logo 70x50px

GGI Geneva Group
International AG

Schaffhauserstrasse 550
P.O. Box 286
8052 Zurich


T: +41 44 2561818
F: +41 44 2561811
This email address is being protected from spambots. You need JavaScript enabled to view it.


Legal Disclaimer & Privacy Statement

Legal Disclaimer

This website is managed by Geneva Group International AG Zürich (hereinafter referred to as "GGI") on behalf of the member firms of GGI, a worldwide organization of independent Law, Accounting and Consulting Firms. GGI provides information and documentation on World Wide Web sites, such site(s) being known as the GGI Internet (hereinafter referred to as the "Website"). If you make any use of this Website, you confirm that you agree to each of the terms and conditions set forth below. You shall not be authorized to use this Website if you do not agree with any of the terms and/or conditions set forth below.

GGI, a company incorporated in accordance with the laws of Switzerland, provides no legal, audit or other professional services to clients. Such services are provided solely by GGI member firms in their respective geographic areas. GGI and its member firms are legally distinct and separate entities. They are not and nothing shall be construed to place these entities in the relationship of parents, subsidiaries, partners, joint ventures or agents. No member firm of GGI has any authority (actual, apparent, implied or otherwise) to obligate or bind GGI or any other GGI member firm in any manner whatsoever.

No action should be taken or omitted to be taken in reliance upon information contained in this Website. The information contained and accessed on this site is provided by the member firms of GGI for general guidance and is intended to offer the user general information of interest. The information provided is not intended to replace or serve as substitute for any accounting, legal (in those jurisdictions where GGI member firms are permitted to practice law), tax or other professional advice, consultation or service. You should consult with a professional from a GGI member firm in the respective legal, accounting, tax or other professional area. Based on specific facts or circumstances, the application of laws and regulations may vary.

Based on the fundamental universal condition of the electronic communication process, GGI does not guarantee, warrant and/or offer any assurance that this Website (including its functions, contents, downloadable files, software etc.) will be uninterrupted, without delay, error-free, omission-free, or free of viruses, free of Trojan horses, similar destructive software and/or free of harmful codes which may impair the proper functioning of any software, hardware or other equipment and/or materials of the user. GGI does not guarantee, warrant and/or offer any assurance that this Website is compatible with any user's computer equipment (hardware and/or software) or network through which access to this Website is gained. GGI does further not guarantee, warrant and/or offer any assurance that the use of this Website will not lead to viruses, Trojan horses and/or similar destructive software accessing any user's computer equipment.

Access to this Website may be interrupted or unavailable at any time, in particular during maintenance or upgrade procedures. Therefore, the information is provided "as is" without warranties of any kind, express or implied, including accuracy, timeliness and completeness. In no event shall GGI or partners, executives, principals, agents or employees of its member firms be liable for any direct, indirect, incidental, special, exemplary, punitive, consequential or other losses and/or damages of any kind (including, but not limited to, liability for loss of use, data, profits, other intangibles, the costs of procurement of substitute goods and/or services), without regard to the form of any action, including but not limited to contract, negligence or other tortuous actions, arising out of or in connection with this Website, any content on or accessed by use of this Website, or any copying, display or other use hereof even if GGI has been notified of the possibility of such loss and/or damage. All statements, information, downloadable data and files etc. on this Website are made available without liability or guarantee for their correctness, completeness, accuracy, durability, assurance of features, reliability, workability, merchantability, quality, fitness for a particular purpose, achievement of results, non-infringement of proprietary rights, absence of any deficiencies or something similar. GGI shall not be liable for any damage which a user may suffer as a result of any errors in content or arising from any virus or other destructive software. Users are responsible for ensuring that their computer equipment has appropriate security and virus protection features.

All intellectual property rights (in particular copyrights, trademark rights, design rights and patent rights) to the contents of this Website shall be reserved. As content on the site is protected by intellectual property laws (such as for instance copyright, trademark, patent laws) as well as by unfair competition laws, any unauthorised use of any materials on the site may violate copyright, trademark, patent and other laws. Pictures, texts, graphics, computer software etc. which are contained, featured and/or downloadable on this Website may not be copied, downloaded or used in any other way unless indicated otherwise on this Website. Should a user download and/or print the materials on this Website for personal or non-commercial use, the user must retain all copyright and other proprietary notices contained in the original materials on any copies of the material and the source must be indicated completely. The complete and/or partial reproduction, transmission (electronically and/or otherwise), modification, public display, performance, distribution, linking, framing or other use of this Website for any public and/or commercial purposes shall not be allowed without the prior written consent of GGI and the complete indication of the source. GGI does not grant the users of this Website any rights (in particular no intellectual property rights), except for the rights that are necessary to use this Website for purposes permitted under these conditions.
Some links on this Website refer to other websites which have been set up and are operated by third parties. Such links are provided only as a convenience to users. GGI does not control and is not responsible for any of these sites or their content. GGI explicitly disclaims any endorsement or recommendation of and guarantee or liability for such websites of third parties.
This Website is not intended for persons who are subject to a jurisdiction that prohibits the publication of and/or access to this Website (be it because of the nationality, their age, the domicile or for any other reason). If you are affected by such restrictions, you may not access this Website.

Privacy Statement

Geneva Group International AG Zürich, a joint-stock company incorporated under Swiss law with Swiss company registration number CH- whose registered office is at Schaffhauserstrasse 550, CH-8052 Zurich, Switzerland, (hereinafter referred to as "GGI") is in charge of the data supplied to this Website and the processing of such data. This website is managed by GGI. The goal of this target group is to develop additional sustained and diversified business opportunities on the basis of these relationships.

For the purposes of this Privacy Statement, member firms, correspondent firms, associated firms of GGI and other companies assisting GGI in running and maintaining this website are together described as Partners.

GGI provides information and documentation on World Wide Web sites, such site(s) being known as the GGI Internet (hereinafter referred to as the "Website"). This page contains the information gathering and use policies adopted by GGI in connection with the Website. These policies are subject to periodic review and any changes will be included within this section of the Website.
GGI is not responsible for the privacy policies of third party sites to which links are provided (including sites of Partners of GGI). The privacy policies on these sites should be checked before providing any personal information to these sites.

GGI is committed to the protection of personal information supplied by clients and prospective clients and other users of this Website. GGI provides further support and specialised services for Partners most of whom are situated outside Switzerland in countries which may not afford an adequate level of protection for personal data. Personal information submitted to the Website may be transferred to other Participant Firms outside of Switzerland to the extent necessary to meet the purpose for which the information was submitted. In submitting personal data to this Website in connection with a request for support and specialised services, the individuals concerned consent to the transfer of their personal data outside Switzerland to the extent necessary to comply with the request.

Collection of information

GGI will only collect and use personal data voluntarily and openly provided to this Website. Authorised users are able to browse the Website without disclosing any personal information. An authorised user of this Website may choose to provide GGI with limited personal data as required in order to register for certain services; once registered the information will only be used for the specified purpose(s). If you provide any data by completing the appropriate spaces on this Website or by sending a message to GGI by any means (particularly e-mail) you confirm that you agree that GGI may save, analyze and/or use the date for any purposes, including, but not limited to sending information and brochures to you. You may revoke your consent to the further use of the transmitted data by GGI at any time by sending an e-mail to GGI.

GGI reserves the right to save information regarding the domain name and/or IP-address of users of the GGI Website or their providers' for administrative, statistical and/or other purposes. The IP address indicates the location of the authorised users' computer on the Internet. GGI does not require registration for access to the Website.

It will normally be clear when personal information is being collected. The information required is the minimum necessary to enable GGI to deal with the services requested, but additional information may be requested in order for GGI to provide the most appropriate response. If such additional information is requested it is highlighted and its provision is voluntary.

We do not solicit sensitive personal data through the Website except where legally required to do so, e.g. for the purposes of retaining information for inclusion in the GGI directories of Partners, their principals and their professional expertise. We would suggest information of this nature is not provided except where such data is for inclusion in GGI directories of Participating Firms, their principals and their professional expertise.

At the present time, the standard technology known as "cookies" is not used on the GGI Website. Cookies are small text files placed on the authorised user's hard drive that allow the Website to store tokens of information in connection with use of the Website by allocation of an identifier to an authorised user while the Website is in use. However, GGI reserves the right to start using cookies at any moment without prior notice. Use of cookies would enable GGI to analyse the operation of the Website, thus permitting continuous improvement of the service that it provides.

Use of information

Information is used only for the specific purpose for which it was provided except where there has been an explicit selection to receive other information from GGI. Personal data provided through the Website will be made available to the provider of the information on request as any individual whose personal data is held on the Website is entitled under the Swiss Privacy Act to the information constituting his or her personal data. Personal information may be deleted from the Website at any time. Requests for copies or deletion of information may be made by e-mailing the Geneva Group International Head Office in Zurich at any time.

Provision of Information to Third Parties

GGI will provide personal information to third parties in the following circumstances:
  • where the transfer is necessary to fulfil the requirements of the operation for which the information was provided, and the third party is a Partner;
  • in order to fulfil a request which involves other Partners;
  • so as to assist GGI's professional advisors regarding matters referred to them concerning the operation of the Website:
  • where requested explicitly by an authorised user of the Website;
  • or as required by a court order or any other legal or regulatory requirement.
GGI does not collect or compile personal data or information obtained by the Website for dissemination or sale to outside parties not Partners for the purposes of marketing or mailing by or on behalf of third parties. GGI does not undertake marketing activities for third parties.

Accuracy of information

GGI assumes responsibility for keeping an accurate record of personal data once it has been submitted, but not for confirming the ongoing accuracy of the personal information. If GGI is advised that the personal data is no longer accurate, it will be amended (where practical).

Retention of information

Information collected from authorised users of the Website will be kept in order to provide the required services as well as for statistical purposes. Once the service has been completed all information will be destroyed in accordance with GGI's data retention policies. Where the information has been collected in connection with an expression of interest in working for GGI or a Partner it is agreed that GGI may use, hold and destroy personal data supplied in connection with the initial expression of interest in accordance with GGI's standard recruitment procedures:
  • details may be retained for up to the next twelve months for the purpose of notification of suitable vacancies that might arise;
  • details may be used for the purpose of research and analysis designed to improve recruitment and human resources policies and practices.
Where the authorised user of the Website has provided additional information, personal details will be retained for a period of time reasonable in the context of the nature of the request.

If these conditions are not acceptable the site should not be further used.

Security of information

GGI has implemented accepted standards of technical measures and security policies that are aimed at protecting the personal data it has under its control from:
  • unauthorised access;
  • improper use or disclosure;
  • unauthorised modification;
  • unlawful destruction or accidental loss.
All GGI personnel are required to keep personal information confidential and only authorised persons have access to such information.

Please note that the Website contains links to other sites (including sites maintained by Partners) which are not governed by this privacy statement.

Additional general conditions governing the Legal Disclaimer and the Privacy Statement

The rejection of any liability and/or responsibility regarding the Website and its content and other terms and/or conditions contained in this legal information are also applicable to all companies associated or affiliated with GGI, particularly GGI member firms (Partners).

GGI reserves the right to change all and/or any of the regulations mentioned above at any time without any prior announcement. Unless explicitly indicated otherwise, the new regulations shall immediately apply to all information, indications etc. featured on the GGI Website. By continuing to use the GGI Website, you accept all changes of such regulations.

The invalidity or unenforceability in any jurisdiction of any of these terms shall not affect the validity or enforceability of any other of these terms. If any term is held to be invalid or unenforceable it shall be deemed to be amended to the minimum extent required to render such term valid or enforceable, such amendment to be determined by GGI.

The Legal Disclaimer and the Privacy Statement indicated above shall be governed by and are construed in accordance with Swiss substantive laws (excluding the rules of the conflict of laws) and the courts of Zurich, Switzerland shall have exclusive jurisdiction in any possible dispute.

Copyright pictures
The copyright of the photos is published here or under the articles.

Geneva Group International; Rieder Media - Uwe Rieder Kurhan; lagom; Abou Jaoude, Siegmar; Jürgen Effner; magcom; Maksim Šmeljov; Gilles Paire; david hughes; clayllama; robynmac; Dan Marsh; daphot75; Suzanne E.; Pierre-Yves Babelon; QQ7; Fotokon; reinobjektiv; cienpies; Alterfalter; Mark Yuill; Flying-Tiger; Katja Wickert; sk19; fazon; Andy Dean; Immo Schiller; Pavla Vanicka; jamesdavidphoto; sysiphus; Kirill_M; Herbert Esser; djama; Rafael Ben-Ari; ollirg; bruder jakob; soleg; Kobby Dagan; Chris Boswell; Hagit Berkovich; Ruzanna Arutyunyan; lilufoto; zybilo; Esther Wagner; pixelfux; Jim Parkin; Zacarias da Mata; Martina Berg; Konstantin Yuganov; Gail Johnson; maudanros; auremar; swisshippo; tobago77; rudi1976;; detlef menzel; Luftbildfotograf; FotolEdhar; Temistocle Lucarelli; ErnstPieber; synto; ZINQ Stock; Tupungato; Barbara Helgason; Aleksey Khripunkov; Lucian Milasan; Gabriela; JonaSanpo Tokyo; Leonid Tit; Sven Hoppe; sborisov; denys_kuvaiev; G.J. Prozee; Andrey Burmakin; Digitalpress; gemenacom; arsdigital; deusexlupus; travelwitness; Alison Cornford; gena96; anyaivanova; spiritofamerica; G. Mönks Photografie; Moreno Novello; Picture-Factory; Galyna Andrushko; endostock; Thomas Röske; carlos; Mezzalira Davide; griangraf; laur7410; simon gurney; sborisov; ChantalS; th-photo;kbuntu; maudanros; apops; JR Photography; Josemaria Toscano; luanka; Tyler Olson; Jörg Hackemann; drubig-photo; AlfaSirius; arenaphotouk; vvoe; rolffimages; Ross Kummer; dabldy; silver-john; Wimbledon; nitroshoprod; Moreno Soppelsa; piccaya; Hawkeye; Horváth Botond; motodan; fazon; Minerva Studio; Digishooter; Mapics; TMAX; Fanchy; JFL Photography; kichigin19; Nmedia;  fotofuerst; Henri FRONTIER; Marcin Kubiak; pitrs; goldencow_images; habrda; nattanan726; dmitrydesigner; PackShot; swisshippo; michaeljung; Friedberg; Rawpixel; bluedesign; Ralf Gosch; Forgiss; Frankix; Jörg Hackemann; Gilles Paire; JaimeP; peresanz; lumen-digital; Stefano Garau; AlexF76; industrieblick; sborisov; chris2766; mitifoto; kamonrat; Rainer Plendl; peresanz; Vojtech Vlk; scabrn; Luftbildfotograf; Andrew Kazmierski; bruno135_406; pressmaster; vandertens; Tom-Hanisch; Alexey Stiop; Patrik Stedrak; Jiri Foltyn; kosmos111; Tomfry; S.Alias; beerkoff; Peter Marble; forcdan; Henryk Sadura; TTstudio; samott; Nordreisender; QQ7; imagineilona; 072618; aroberlin; lunamarina; whitelook; Pavel Parmenov; Jeff; jcfotografo; Jiri Foltyn; JS; Robert Wilson; SNEHIT; Sergii Figurnyi; mandritoiu; tilialucida; rabbit75_fot; IRStone; stockphoto mania; saiko3p; zoltangabor;  E. Adler; lovegtr35; kiravolkov; davidevison; Kruwt; alexandro900; Rafael Ben-Ari; Frédéric Prochasson; Halfpoint; fotoherkules; eddygaleotti; mandritoiu; Mik Man; ALCE;  LUNYANSKIY; Sondem; heyengel; forcdan; IRStone; gianliguori; Henryk Sadura; .shock; SNEHIT; alex9500; mpodrucki; KarenDMartin; mimadeo; SNEHIT; IRStone; lena_serditova ;  Friedberg; pixelABC; peshkov; Klaus Heidemann; photofang; frakala; Beboy; vacant; Noppasin; : Leonid Andronov; surangaw; dennisvdwater; Chris Lofty; Robert Kneschke; Gajus; chrisdorney; samografy; DOC RABE Media; vichie81; everythingpossible; Rafael Ben-Ari; Eisenhans; bakerjarvis; stokkete; hankimage9;