MILAN (REUTERS) – Italy has approved a new stimulus package in its 2021 budget to foster an economic rebound from the recession caused by the coronavirus crisis, a government statement said on Sunday (Oct 18) after a late-night Cabinet meeting.

The ruling coalition, led by the anti-establishment 5-Star Movement and centre-left PD party, agreed on a preliminary version of the stimulus package, a government source said, leaving final details to be hammered out.

Among measures to support the health and education system, the government will set up a four billion euro (S$6.37 billion) fund to compensate companies worst hit by coronavirus lockdowns.

The budget also extends temporary lay-off schemes for companies with workers on furlough and offers tax breaks to support employment in the poor south of the country.

Italian Prime Minister Giuseppe Conte is expected on Sunday to also announce new measures to curb the steady spike in Covid-19 cases over recent weeks.

One of the European countries worst hit by the pandemic, Italy has forecast a 9 per cent economic contraction for 2020 and a budget deficit equating to 10.8 per cent of gross domestic product.

The expansionary package is expected to keep Italy’s deficit next year to 7 per cent of economic output, up from a 5.7 per cent forecast in April, reflecting the additional spending.

Italy has forecast economic growth of 6 per cent in 2021.

Expansionary measures next year will total 40 billion euros, including cheap loans and grants from the European Union’s Recovery Fund, Italian Minister of Economy and Finance Roberto Gualtieri told lawmakers this month.

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