Italy is to spend 1.5 billion euros (£1.2 billion) to try to boost youth employment.
The funds include tax breaks for companies that hire people aged 18-29, and will target the country's deprived southern areas.
The BBC reports two in five young Italians are out of a job, while the national unemployment rate is about 12%.
The measures were unveiled on the eve of a European Union summit in Brussels on youth joblessness.
Prime Minister Enrico Letta said that the money aimed to get at least 200,000 young Italians into the workforce by aiding those with temporary contracts as well as boosting training and school-leaver schemes.
In addition to the measures to boost youth employment, the government also said it would delay a planned rise in value-added-tax, which will cost it an additional 1 billion euros.
Mr Letta's predecessor Mario Monti announced a VAT increase in 2011 in an attempt to improve investor confidence in the government's capability to repay its debts. The proposed freeze must be approved by parliament first.
"These are all measures that will help consumer spending in the short term ... and a bridge to economic recovery," said Economy Minister Fabrizio Saccomanni.
Italy's economy shrank by 0.6% in the first quarter of this year.