The Paraguayan international, who has made no secret of his desire to leave Ewood Park at the end of the season, has been linked with a reunion with former Rovers boss Mark Hughes at Manchester City on more than one occasion.
However, Cascarino believes the ex-Bayern Munich front-man would be a worthwhile addition to Rafael Benitez's squad at Anfield, who feels Santa Cruz - who has netted 23 goals in 57 league outings for Blackburn - would prove the perfect foil for Spanish talisman Fernando Torres.
"Liverpool will again be Manchester United's closest challengers next season after finishing the season in quite superb form. In fact, in the last few months of the season Liverpool have been the best team in the Premier League," he said.
"The club will have to invest in a few areas in the summer but they are definitely closing the gap with Manchester United.
"Fernando Torres has suffered from hamstring injuries this season and with that particular problem will always miss games.
"Therefore, it's important that Rafa moves for a top class centre-forward like David Villa or Samuel Eto'o. If I was in Rafa's shoes, the man I'd go for is Blackburn's Roque Santa Cruz.
"The Blackburn striker would be a great asset to the team and despite not ideally fitting into the current system Liverpool play, he is exactly the type of player to get even more out of Torres."
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