BERLIN, Sept 16 (Reuters) - A new budget dispute emerged

within Germany's ruling coalition on Monday, with the finance

ministry saying funds no longer needed to subsidize Intel's ( INTC ) new

chip-making plants should be used to balance the books and the

economy ministry pushing back.

Berlin had in June agreed subsidies worth nearly 10 billion

euros ($11.13 billion) with the U.S. chipmaker to build two

leading-edge facilities in the eastern city of Magdeburg as part

of its expansion push in Europe.

Intel ( INTC ) CEO Pat Gelsinger released a memo to

employees on Monday outlining a number of steps the company

would take to revive itself which included pausing construction

at its project in Germany for two years.

The announcement came amid a struggle within German

Chancellor Olaf Scholz's fractious three-way coalition to close

a 12 billion euro gap between projected spending and revenue in

the 2025 budget.

"All funds not required for Intel ( INTC ) must be reserved in the

federal budget to reduce unresolved financial issues," Finance

Minister Christian Lindner of the fiscally hawkish Free

Democrats (FDP) wrote on the social media platform X. "Anything

else would not be a responsible policy."

Economy Minister Robert Habeck of the environmental Greens

however said the government would discuss how to use the funds

"sensibly and carefully and use them for the good of the

country."

A source close to Habeck said that the subsidies were due to

come from the off-budget climate and transformation fund meaning

they were not available to plug the regular budget.

The fund is used to finance numerous climate projects that

are particularly important to the Greens but 60 billion euros

were cut from it last year due to a constitutional court ruling,

exacerbating friction within the coalition over money.

($1 = 0.8984 euro)