UPDATE 1-Italy halts incentive scheme for card payments, eases firing ban

* Payment group Nexi shares fall

* Firing ban limited to sectors worst hit by lockdowns

* Rome funds 13 more weeks of furlough for manufacturers

* Sets up fund to offset rising raw material costs (Updates with confirmation after cabinet meeting)

ROME, June 30 (Reuters) - Italian Prime Minister Mario Draghi on Wednesday halted a refund scheme aimed at promoting digital payments, and partially lifted a ban on firing which was introduced last year at the height of the Italy’s COVID-19 pandemic.

The previous government led by Giuseppe Conte launched the refund scheme in 2020, allowing Italians to claim back 10% of all their credit or debit card spending up to a ceiling of 3,000 euros ($3,554.70).

The project, planned to last until June 2022, was aimed at reducing widespread tax evasion in the traditionally cash-based economy.

However, the cabinet decided to suspend the scheme from July 1 until the end of this year, Draghi’s office said in a statement, confirming a draft of the decree previously reported by Reuters.

Draghi told ministers the measure was badly designed because it favoured richer households with less propensity to spend, his office said.

The so-called “cashless economy” plan was estimated by the Treasury to cost almost 5 billion euros over this year and next.

A senior lawmaker in the ruling coalition said on condition of anonymity that Rome needed to make savings to fund other measures in the pipeline, such as a reform of jobless benefits, for which the draft seen by Reuters earmarked 1.5 billion euros.

The suspension of the refund scheme, first mooted on Monday after a meeting between Draghi and key coalition figures, has hit shares in Italian payments group Nexi, which were slightly lower on Wednesday after falling 1.2% on Tuesday.

It has also triggered criticism within the ruling, multi-party coalition, especially from the 5-Star Movement.

Separately, the government decided not to extend a ban on firing beyond the current end-June deadline except for workers in sectors hardest-hit by COVID-19 lockdowns.

For workers in textiles, shoemaking and fashion, the ban will continue through October. Companies in those sectors can access a further 17 weeks of a pandemic-related furlough scheme.

Another 13-week temporary lay-off scheme will be made available to help manufacturing and construction companies.

The government also earmarked 1 billion euros to try to cushion the impact of costlier raw materials on electricity bills.

$1 = 0.8440 euros editing by Gavin Jones and Emelia Sithole-Matarise