BERLIN Germany's cabinet approved on Wednesday the first draft of the 2024 budget for Europe's biggest economy and its financial plans through to 2027, the finance ministry said.

"Today we have adopted a budget proposal aligned with fiscal realities," Finance Minister Christian Lindner said in a presentation of the draft to media.

Germany will slash new public borrowing to within constitutionally mandated limits next year, as the state progressively reins in spending that surged in response to COVID-19 and the war in Ukraine.

"We are now ending the crisis era of expansive fiscal policies," Lindner said.

Lindner plans net new debt of 16.6 billion euros ($18.1 billion) for 2024, respecting the country's debt brake, which constitutionally limits the budget deficit to 0.35% of economic output.

The brake was suspended between 2020 and 2022 to help cushion the economic impact of the pandemic and the jump in energy prices that followed Russia's invasion of Ukraine.

"We will have record investments and set clear priorities," the finance minister said. The budgetary plans include 54.2 billion euros in investments in 2024.

Germany plans to comply with NATO's 2% of gross domestic product target for military spending in 2024 with 51.8 billion euros budgeted for defence and 19.2 billion in extra-budgetary funds for the armed forces.

Lindner said any additional spending in defence in the financial plan up to 2027 would have to come from structural measures, without elaborating.

"Additional structural spending is only possible with structural measures to finance it," Lindner said, foreseeing further negotiations inside the coalition.

Finance ministry sources estimate there is still a gap of 14.4 billion euros in the mid-term budget plan.

"The draft budget for 2024 is not a conclusion, but a prelude to further consolidation efforts," Lindner said.

($1 = 0.9181 euros)

(Reporting by Christian Kraemer and Maria Martinez; Editing by Miranda Murray and Mark Potter)