UPDATE 2-Italy presents new stimulus plan, Draghi says hopes no more needed

* Italy provides 17 bln euros to businesses hit by lockdowns

* More funds approved for vaccine roll-out, tax breaks on hirings

* Rome extends state guarantees on bank loans, debt relief

* PM Draghi says expects to raise 2021 GDP forecast (Recasts with quotes and details after news conference)

ROME, May 20 (Reuters) - Italy on Thursday approved 40 billion euros ($48.8 billion) of new economic stimulus and Prime Minister Mario Draghi said that with the coronavirus crisis easing he hoped no more would be needed.

The extra spending, which funds tax relief and grants to businesses, was already factored in to the government’s public finance targets in April and will drive the budget deficit to 11.8% of national output this year, from 9.5% in 2020.

Rome’s huge public debt, the second highest in the euro zone as a share of gross domestic product, is forecast by the Treasury to climb to 159.8% of output this year, the highest level in Italy’s post-war history.

Including the latest measures approved by cabinet on Thursday, Italy has deployed more than 200 billion euros of extra spending since the COVID pandemic hit the country 15 months ago.

The spending decree, which includes funds to create jobs and bolster the health service, “doesn’t leave anyone behind,” Draghi told reporters after the cabinet meeting.

“If the COVID pandemic situation continues to improve as we are seeing at present, I hope there will be no need for any other decrees of this type this year,” he added.

Having been in semi-lockdown for most of this year, Italy has seen its daily deaths and cases decline in recent weeks, prompting the government to ease restrictions.

Of the 40 billion euros, some 17 billion will finance grants to companies, Draghi said, adding that he expected to raise Italy’s current 2021 economic growth forecast of 4.5%, following the huge 8.9% contraction in 2020, a negative post-war record.

Around 4 billion euros will be used to support employment, with measures including tax breaks for companies that hire and train permanent employees.

The government also approved a measure extending a freeze on firing which was due to expire in June, Labour Minister Andrea Orlando said. For large businesses which apply for furlough schemes linked to the COVID emergency, the extension will run until end-August.

More than 2 billion euros will go to the health service, as Italy tries to accelerate its COVID-19 vaccine roll-out.

As of Wednesday, some 15% of the population had been fully vaccinated, while around 33% had received at least one shot, figures which put the country broadly in line with the European Union average.

Other measures in the spending package include a six-month extension of state guarantees on bank loans to the end of 2021, and a debt holiday scheme on loan repayments for small-and medium-sized companies.

Until the end of June, no repayments of any type will be due, while from July until the end of the year, only the interest must be paid. The government also prolonged tax breaks for the sale of banks’ bad loans, a draft of the decree showed.

$1 = 0.8201 euros additional reporting by Angelo Amante, Editing by William Maclean