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 – Italy’s government will agree on a limited extension of costly “superbonus” subsidies for home improvements which Prime Minister Giorgia Meloni had previously blamed for wrecking public finances, a coalition party said on Thursday.

The Forza Italia party, which pushed hard for the concession, said 110% tax credits would remain in place for low-income households who have not completed home renovations this year.

They otherwise faced having to draw on less generous 70% tax credits, kicking in next year. Forza Italia also said households unable to finish works in 2023 would not have to pay back tax credits, as originally foreseen.

Forza Italia spokesperson Raffaele Nevi called it a “compromise” that would stave off “the bankruptcy of hundreds of businesses and households” and would support an economically strategic sector like the construction industry.

The original superbonus scheme, introduced in 2020 amid a COVID-related slump, made it possible for people to get back 110% of the cost of making their homes more energy-efficient via tax credits.

It has been credited with helping the economy rebound, but Ms. Meloni’s rightist government scaled it back in February saying the subsidies were unaffordable and mostly benefiting the well-off.

Economy Minister Giancarlo Giorgetti has said the total cost of the superbonus scheme will top 100 billion euros ($111.25 billion) by the end of this year. This month he compared it to “a nuclear power plant that continues to emit radioactivity”.

The government is concerned that an accounting ruling linked to the incentives, to be issued by the EU’s statistics arm Eurostat by mid-2024, could further push up next year’s fiscal deficit.

Italy, the euro zone’s third-largest economy, ran a deficit of 8% of gross domestic product (GDP) last year, against a target of 5.6%, while its debt-to-GDP ratio stood at 141.6%, the second-highest in the EU after Greece.

The deficit is targeted at 5.3% of GDP this year, but Mr. Giorgetti said last week it may overshoot.