* Cheaper model to be priced at 10,900 euro - report
* Fiat to hire 1,400 new workers in Serbia in 2013 and 2014 - report
BELGRADE, March 25 (Reuters) - Serbia and Italian carmaker Fiat have agreed on a subsidy deal to produce a cheaper version of the 500L compact car for the domestic market, a newspaper reported on Monday.
Under the deal, the Serbian unit of Fiat, based in the central city of Kragujevac, will produce a version of 500L for 10,900 euro ($14,200) or about 3,000 euro less than its regular price, the Blic newspaper said, citing Finance Minister Mladjan Dinkic.
The factory, a 1 billion-euro ($1.3 billion) joint venture 67 percent owned by Fiat and 33 percent by Serbia, will use one-time government subsidy from the 2013 budget for 1,400 new hires this year and next to produce the cheaper model.
The Fiat 500L is a stretched compact model of the Fiat 500 subcompact. It is already made in Serbia for export.
"The Fiat has pledged to hire 1,400 new workers ... for that they will get subsidies of 10,000 euro per every new worker and we have agreed that the company will use that money to produce a version of 500L for the (Serbian) domestic market," Dinkic was quoted by Blic as saying.
The Finance Ministry was not immediately available to comment.
The Serbian government subsidises direct foreign investments to help it emerge from recession and to combat unemployment, which currently stands at about 25 percent.
Last week, Dinkic said subsidies would be disbursed on condition Fiat secures local banks and leasing companies to offer five-year deals at 3 percent a year in euros, the preferred currency in the European Union candidate country.
Serbia expects a 25 percent rise in the value of its exports this year to around 11 billion euros ($14 billion) with the automotive industry accounting for about 20 percent of the total including production from the Fiat plant.
Earlier this month, Antonio Ferara, chief executive of Serbia's Fiat plant said the company plans to produce between 110,000 and 180,000 of 500Ls for the markets in Europe and the United States in 2013.
The Serbian factory last year produced about 30,000 500L compacts after manufacturing started in July. Ferara said the plant has increased its output rate since January.
($1 = 0.7694 euros) (Editing by Jeremy Gaunt)