German finance ministry advisory board doubtful about efforts to reduce budget gap

By Maria Martinez

BERLIN (Reuters) -The advisory board to the German Finance Ministry sees the three options under consideration to reduce a 17 billion euro ($18 billion) budget shortfall as problematic, according to a letter seen by Reuters on Thursday.

The German cabinet passed its 2025 budget in July after months of political wrangling. German Finance Minister Christian Lindner told a news conference that the government was looking at innovative ways to reduce the shortfall.

The options under scrutiny are using extra funds from state bank KfW, as well as converting the grants of Germany's national rail operator Deutsche Bahn and the country's highway company into loans.

The advisory board to the ministry expressed doubts about these options, arguing that they could put at risk the constitutionally enshrined debt brake.

Lindner said, when presenting the budget, the constitutionality of these options was being studied. The government is trying to avoid the chaos of November 2023, when a court ruling blew a 60-billion-euro hole in the public finances and threw the government's financing framework into turmoil.

Negotiations on the financing of the 2025 federal budget must therefore continue in the German coalition.

Finance ministry sources said that suspending the debt brake, which restricts public borrowing to 0.35% of gross domestic product, is not an option "constitutionally or economically."

($1 = 0.9270 euros)

(Reporting by Maria Martinez and Holger Hansen, Editing by Friederike Heine and Toby Chopra)