Jürgen Kromphardt is responding to the following questions:

Let us start with a question about Germany’s current economic situation. The leading economic research bodies expect 1.8% growth 2004 after three years of stagnation. What do you see as the reasons for this recent weak economic performance?

If you ask an economist or a politician what the causes of Germany’s unemployment levels are, they will almost certainly say that the German labour market is sclerotic and inflexible and that it needs deregulation. They will also tell you that the economy needs to create a low-wage sector or expand the one it already has. Do you share that view? Would you say that the structure of the labour market is actually causing the current lack of growth?

Don’t you think there is a risk that expanding the low-wage sector could destabilise the entire pay structure?

The Christian Democrat and Christian Social Party are calling for legislation to modernise labour law; they want to create what they call "company-level labour pacts". These proposals ultimately amount to a suggestion that bargaining autonomy and regional collective agreements should be scrapped. And Michael Rogowski, who heads the Federation of German Industry, has said that he would like to make a bonfire of collective agreements. What would be the impact of that – or, to be more specific, would it not bring a risk of deflation?

At the end of 2003, the metalworkers' union IG Metall called for a 4% pay increase for the sector. Do you think its claim is too high and damaging to the economy?

That brings us on to fiscal policy. In the early 1990s, the United Kingdom and the USA responded to economic downturns with successful anti-cyclical economic policies. And over recent years, budgets in both countries have again successfully responded anti-cyclically to recession. Is this policy not a model for Germany and Europe?

Is it time to rewrite the Stability and Growth Pact? And what ought a new Pact to look like? What do you think of the idea that governments should be required to consolidate public expenditure only when the economy is growing and that, on principle, borrowing to fund public investment should be excluded from government deficit calculations?

Public sector investment in Germany is running at 1.6% of GDP, considerably lower than most other industrialised countries. The European average is around one percentage point higher, in fact. And local authorities in particular are not investing anything like enough: experts think that towns and cities ought actually to be investing twice as much as they currently are if local infrastructure is to be maintained at an appropriate level or, indeed, brought up to that level. So what ought to happen to achieve that?

When people are discussing education funding, they often raise the issue of inheritance tax and wealth tax. The Social Democrats (SPD) voted at their party conference to increase inheritance tax, while the Greens want a further increase in wealth tax. What's your view?

In its most recent report, the Council of Economic Experts proposed a "dual" income tax system, with differential rates payable on earned and unearned income. Do you think that is compatible with the principle of taxation according to ability to pay?

What is your view of the policy followed by the European Central Bank since 1999?

There is widespread speculation in the economic press as to when the European Central Bank will be putting up interest rates. Against the backdrop of the current economic situation, with a strong euro and no threat of higher inflation in the euro zone, is it not time to think of cutting interest rates?