ROME - Italy's government is considering extending a freeze on firing until the end of June, a draft document seen by Reuters showed, in a further effort to limit the impact of the coronavirus pandemic on the labour market.

The ban was introduced last year to prevent a surge in unemployment while companies and shops were shuttered to stem the COVID-19 outbreak, as the government pumped billions of euros into social security and financial aid to businesses.

It was due to expire on March 31 but is now likely to be extended to June 30 by the new national unity government led by Mario Draghi, according to the draft document, which also proposes setting aside additional resources to fund the furlough schemes until the end of this year.

The draft is the basis of a new stimulus package worth 32 billion euros, already promised by the previous government, which is likely to be approved by cabinet next week.

A government source told Reuters the Treasury had estimated that at least 250,000 people could lose their jobs if the ban on firings is not prolonged.

Italy's economy shrank by 8.9% in 2020, national statistics institute ISTAT reported this month, the steepest annual gross domestic product (GDP) drop since World War II, and the curbs on business continue to blight prospects of recovery. 1

The 32 billion euro financial package due for approval is expected to push up the 2021 budget deficit to 8.8% of GDP from the previous goal of 7% set in September. 

According to the document, it will include some 600 million euros ($724.86 million) of reimbursements for winter tourism operators whose business has been wrecked by a government ban on skiing. 

The first Western country to be hit by the COVID-19 pandemic, Italy has recorded 98,288 fatalities since the outbreak emerged around a year ago, the second-highest death toll in Europe and the seventh-highest in the world.

The draft document also outlines 2 billion euros of additional financing for the vaccine campaign.

Draghi has urged the European Union to accelerate inoculations and be tougher with companies that fail to meet supply commitments. 

($1 = 0.8277 euros)

(Editing by Gavin Jones and Bernadette Baum) ((Angelo.Amante@thomsonreuters.com;))