(Bloomberg) -- Italy’s government approved a package of measures to mitigate the impact on consumers of a spike in energy prices.

Prime Minister Mario Draghi’s administration will spend more than 3 billion euros ($3.5 billion) to offset an increase in energy bills which could have been of as much as 40% without government intervention. The new measures include cuts to VAT on energy and will apply to the last quarter of the year.

Italy is enjoying its strongest economic rebound since the 1970s as the world emerges from the coronavirus crisis, but along with other European countries it is dealing with the impact of soaring energy and gas prices on consumers.

Addressing the business community earlier Thursday, Draghi said growth is expected to approach 6% this year and confirmed a pledge not to raise taxes. The government is due to present its new economic outlook next week.  

“We don’t know yet if the recovery is permanent,” Draghi said. The government is therefore committed to finding “immediate solutions to these problems, and designing long-term strategies to limit vulnerabilities” from energy prices on supply lines and the overall economy. 

Skyrocketing energy prices are plaguing European economies and the impact is set to worsen during the cold season. Italy is particularly vulnerable as it is relies on imports to meet over 70% of its energy needs with almost 40% coming from natural gas, according to official data. The country is the second-largest natural gas importer in Europe after Germany.


(Updates with cabinet meeting)

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