* Germany can only reduce debt issuance level slowly - Daube
* Says not currently planning 30-yr linker
* Aims to reduce proportion of money mkt instruments
By Christina Amann and Sarah Marsh
FRANKFURT, Oct 28 (Reuters) - Germany will have to issue significantly more debt than before the financial crisis for several more years, despite its strong recovery and tough austerity measures, the head of its Finance Agency chief said.
But levels of net new borrowing next year look set to be comparatively modest.
Carl Heinz Daube told Reuters in an interview that high refinancing needs meant Europe's largest economy could reduce total debt issuance only slowly, regardless of the level of net new borrowing.
"It will take greater efforts to reach the pre-crisis level of total debt issuance," he said.
The finance agency would have to issue between 260 billion and 280 billion euros of debt instruments annually until 2014 simply to service existing debt -- some 60 billion euros more than before the crisis in 2008 which sent Germany reeling into its deepest post-war recession.
On top of that comes net new borrowing bringing the total to more than 300 billion euros next year, said Daube.
The agency cannot finalise its debt issuance plans for next year until the government has published its 2011 budget plans, which are due at the beginning of November.
Chancellor Angela Merkel's cabinet estimated net new borrowing for next year at 57.5 billion euros in July. Given Germany's faster-than-expected recovery, however, coalition sources say it is now more likely net new borrowing will be under 50 billion euros.
Finance Minister Wolfgang Schaeuble said last weekend net new borrowing would be around 50 billion euros this year, well below the initial target of around 80 billion euros.
Lower borrowing this year automatically reduces the level of borrowing allowed in subsequent years because of a new "debt brake" law which comes into force in 2011.
The law requires Germany to cut the structural deficit step by step by around 10 billion euros and reduce the deficit-to-GDP ratio to a limit of 0.35 percent by 2016.
Daube said the finance agency wanted federal debt issuance to cover the entire maturity structure in 2011, as it did this year. The Finance Agency will publish its 2011 debt issuance calendar in December.
MONEY MARKET OVERKILL
In the long term, the agency wants to reduce the amount of money market instruments it issues in favour of more capital market instruments, said Daube. During the crisis it had been obliged to issue more money market instruments in order to cover costs potentially arising from bank bailouts.
It was still unclear however whether the agency could already next year re-establish the relation of two thirds capital market and one third money market instruments that had been in place before the financial crisis.
The agency remains committed to issuing inflation-linked bonds, Daube said, and aims in the long run to generate between 3 and 5 percent of its annual issuance volume through such so-called linkers. However conditions were not yet favourable for the agency to issue a 30-year linker.
"It depends on the market conditions," said Daube. "We are continuously examining these, at the moment I don't see any opportunity for one."
Daube said the agency would only issue a foreign currency bond if it yielded significant savings for the German taxpayer. It was keeping an eye out for such an opportunity and would decide quickly whether or not to issue such a bond. Germany last issued a dollar bond in autumn 2009.
(Editing by John Stonestreet)