Italy government approved additional deficit spending for up to €40 billion on Thursday which will be used to fund a special stimulus package to support residents and businesses hurt by the coronavirus pandemic.
The additional spending raises the public deficit target for 2021 to 11.8% of gross domestic product, up from an 8.8% forecast, reaching levels unseen since the early 1990s.
The new deficit target is part of the annual Economic and Financial Document that was approved on Thursday by the Cabinet headed by Prime Minister Mario Draghi.
The package was needed to finance aid measures including unemployment benefits and income support for individuals and families, bringing Italy’s overall pandemic spending to more than €170 billion ($202 billion).
Due to the extra-spending, Italy’s massive debt will also rise to record levels, surging above the 159.5% record set in the 1920s.
The Cabinet also approved forecasts for economic growth at 4.5% in 2021, including the effects of stimulus measures to contain the fallout from the pandemic.
Italy has been among the hardest-hit countries in Europe by the coronavirus, which has killed more than 115,000 people here, dealing a fatal blow to key economic sectors like tourism.
As restaurants and business owners protested against painful lockdown rules, with some demonstrations turning violent, Draghi indicated that some measures could be softened later this month.
The government pledged to accelerate its national vaccination campaign, but it is struggling to reach its target of 500,000 shots per day by the end of the month, as shortages in vaccine doses and halts related to rare adverse reactions are slowing the campaign.
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