Prime Minister Mario Monti said the Italian government would reimburse this year up to €30 billion it owes to businesses in order to provide a boost to the struggling economy.
"With today's intervention we will begin repaying commercial debts owed by the state and pay off €20-30 billion already this year," Monti said.
According to business associations, the Italian state owes suppliers some €70 billion.
Monti said the repayments are "important, fundamental" because companies "need liquidity, the fuel to restart the motor of productivity and finally see some rays of light" in the economy which has been in recession since the end of last year.
Earlier, Italy's national statistics agency slashed its economic forecast for this year to a 1.5% contraction, more than the 1.2% drop expected by the government.
The Organisation for Economic Development and Cooperation today also lowered its forecast for Italy to a 1.7% contraction this year and said it expects the recession to continue next year with GDP shrinking 0.4%.
Monti said Italy would by the end of this year meet EU regulations on paying suppliers within 60 days, down from up to 180 days currently
