The Italian government will have a draft of its plans to extend its car buying incentives package ready by the end of this month, according to Il Giornale.

The newspaper quoted industry ministry under-secretary Stefano Saglia saying the draft would also detail how the government plans to gradual phase out of the scheme without giving any more details.

The proposals are intended to give the industry a “soft landing” when the incentives eventually end. The current incentive system risks becoming a “permanent drug”, he said.

On Thursday, light vehicle producer Piaggio chairman Roberto Colaninno said he agreed with Fiat CEO Sergio Marchionne who had said on Wednesday failure to extend incentives into 2010 would be “disastrous”.

The cost of the incentives to the state has been offset by additional value added tax on car sales and savings in payments to temporarily laid off workers, he said.

Italy’s auto industry association Unrae has said that, without incentives in 2010, car sales would fall to between 1.7-1.75m from the 2.1m expected this year.