Italy is likely to offer tax breaks to buyers of new cars in an effort to reverse a 7% slide in sales this year and jump-start the economy, a government spokesman said.
Italy would follow France, Spain and Denmark, which have each increased sales 14% or more during the first four months of this year with various incentives, while overall European sales rose 3%.
Car sales in France, Europe's fourth-largest car market, rose 14% during the first four months of the year after the government offered buyers $890 if they traded in a car at least 10 years old. Car makers matched the offer, leading to a strong increase in small car sales after the combination of government and car maker incentives lopped as much as 20% off prices.
Spain last month began a similar offer, and Denmark's tax breaks to car buyers have helped sales rise 47% during the first four months of the year.
The Italian government is still evaluating various plans to increase sales, Finance Ministry spokesman Carlo Nocera said.
Italian auto maker Fiat, which sells 46% of all cars in Italy and is the country's largest privately owned industrial company, is expected to be the biggest beneficiary of any measures. Fiat is Italy's major domestic car maker, owning the Fiat, Alfa Romeo, Lancia, Masserati and Ferrari brands.
Economists say the month-old government of Prime Minister Silvio Berlusconi needs to encourage consumer spending to help the economy. Fiat's sales during the first quarter rose 11%, but much of that was because of exports.
Volkswagen, Ford and General Motors' Adam Opel division, the next biggest car sellers in Europe's second-largest car market after Germany, also may benefit from the incentives to consumers.
News reports said the government was looking at abolishing taxes to encourage car sales. These include car registration taxes of several hundred dollars, depending on the size of the car, a $35 annual tax on the driver's license, and a similar tax on car radios.
The Finance Ministry's Nocera declined to comment on whether the government would duplicate France's incentive to trade in old cars. One-fifth of Italy's 30 million cars are at least 10 years old.