FILE PHOTO: German Finance Minister Lars Klingbeil holds a news conference in Berlin, Germany July 30, 2025. REUTERS/Annegret Hilse/File Photo

BERLIN (Reuters) -Germany's Finance Minister Lars Klingbeil urged ministries to draw up substantial savings plans to help plug a budget gap of more than 30 billion euros ($34.80 billion) in 2027, according to a letter seen by Reuters on Friday .

The German cabinet approved in July a 2026 draft budget featuring record investment and three times as much borrowing as this year as it aims to bolster infrastructure and defence.

Klingbeil warned in the letter that fiscal pressures will grow from 2027 and called for a "comprehensive review of tasks and expenditures".

The finance ministry's consolidation strategy hinges on boosting growth through record public investment and incentives for private capital, alongside structural cuts.

Klingbeil proposed achieving savings of at least 1% of federal spending in the 2027 budget via task reviews and performance- and impact-based budgeting.

"Not everything that is desirable can also be financed," Klingbeil said in the letter. "We must set clear priorities."

The finance ministry will convene state secretaries in early September to discuss steps towards the 2027 budget and the financial plan to 2030.

($1 = 0.8621 euros)

(Reporting by Maria Martinez, Editing by Rachel More)