By Giuseppe Fonte and Gavin Jones
ROME (Reuters) - The Italian government will call for a confidence vote in the Chamber of Deputies on Wednesday over its 2021 budget which targets the fiscal deficit to fall to 7% of national output from 10.8% this year, lawmakers said.
The vote comes amid coalition tensions fuelled by former premier Matteo Renzi, whose tiny centrist party, Italia Viva, frequently attacks Prime Minister Giuseppe Conte and threatens to bring down his government.
Conte is calling the confidence vote to hasten the passage of the budget, which must be approved by both houses of parliament by Dec. 31. If he loses, he will be forced to resign, but there is little risk of this in the Chamber where, unlike in the upper house Senate, he has a comfortable built-in majority.
Among various complaints, Renzi says Conte has not consulted enough over how Italy should use money expected from the European Recovery Fund, and is upset about the government's reluctance to ask for a loan from the euro zone's bailout fund.
Although Italia Viva polls at no more than around 3%, its cluster of lawmakers is crucial for the government's survival.
Expansionary measures in the budget total around 40 billion euros ($48.99 billion). They will be financed by 25 billion euros of extra borrowing and 15 billion euros of grants from the European Union's Recovery Fund designed to help nations hardest hit by COVID-19.
With the pandemic forcing the government to maintain tough restrictions on businesses, Economy Minister Roberto Gualtieri has promised a new stimulus package early next year which government sources say will total some 20 billion euros.
With a ban on dismissals due to expire in March, the budget provides more than 5 billion euros to fund furlough schemes in the first half of next year.
It offers 420 million euros to beef up incentives to buy low-emission, electric and hybrid cars, 500 million to support hard-hit airport operators and a raft of other incentives for the purchase of items from furniture to televisions.
The budget also sets aside almost 2 billion euros in the next two years to fund tax breaks designed to spur bank mergers and attract a potential buyer for state-controlled Monte dei Paschi di Siena.
($1 = 0.8165 euros)
(Editing by Nick Macfie)