Italy's caretaker government said it would pay €40 billion that the state owes to private companies over the next 12 months, while vowing to stick within the European Union's deficit limit.
The cabinet approved a decree intended to provide funds to cash-strapped firms and help tackle a deep recession in the euro zone's third-largest economy. But some industry groups said it would be difficult for businesses to claim their money, despite the measures.
Prime Minister Mario Monti said on Saturday that delayed payment of bills was "an unacceptable situation that has been accepted for a long time". Monti, who continues to lead a caretaker government after an inconclusive February election, has been in talks with the European Commission, which is concerned about the impact the decree will have on Italy's deficit and its massive public debt.
"We have to follow a path between the two requirements: to help our economy to recover ... and to maintain budget discipline", Economy Minister Vittorio Grilli said. "It's a narrow path but a path that is absolutely viable".
Grilli said the government planned to examine its fiscal performance again in September and the Economy Ministry would be able to adopt corrective measures if the deficit looked likely to breach the "precautionary" limit of 2.9 per cent.
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