Matteo Renzi has devised a novel way to boost Italy’s sluggish economic recovery: the prime minister wants to allow shoppers to buy designer suits, dresses, shoes and other luxury items — in cash.

Italy’s budget law — due to be presented on Thursday — is expected to include a measure that would increase the limit for cash payments in shops from €1,000 to €3,000, Mr Renzi said on Tuesday.

The change would reverse the 2011 decision by Mario Monti, one of Mr Renzi’s predecessors, to cut the cash limit to €1,000 as part of a crackdown on tax evasion at the height of the eurozone sovereign debt crisis, when Italy’s public finances were under scrutiny. It is simpler to evade taxes by paying in cash because such transactions cannot be tracked as easily as card payments.

Italy has a shadow economy worth about one-fifth of its gross domestic product, but recovers only €15bn from tax evasion each year.

Mr Monti described his reduction in the cash limit as a “first step” in transforming “Italians’ thinking”. But Mr Renzi, a 40 year-old former mayor of Florence in power since February 2014, has begged to differ. In a radio interview on Tuesday, the prime minister said the limit should be restored to the level of other European countries.

“It’s a way to help consumption,” Mr Renzi said. “I absolutely agree with Monti’s great battle against tax evasion, but not with his method of sticking the tax police outside the big stores.”

Mr Renzi added that advances in mobile phone and banking technology meant that more transactions were being recorded anyway. “Last year we had nearly €4bn more in tax receipts. Through information technology you recover a lot more evasion than by playing cat-and-mouse,” he said.

Mr Renzi’s proposal to increase cash limits chimes with another economic policy measure in this year’s budget, which is to reduce taxes on primary homes, in that both are designed to encourage consumption.

The Italian economy has begun to grow again, albeit tepidly, after three years of recession and stagnation. But for recovery to take hold it will need to be sustained by higher domestic demand, and not just higher exports deriving from a weaker euro and low interest rates.

But just as Mr Renzi’s plans to slash taxes on a family’s main home has attracted opposition from the left wing of his Democratic party, his efforts to increase the cash limit for shoppers have been criticised.

Pier Luigi Bersani, the former secretary of the Democratic party and a critic of Mr Renzi’s, said the change would favour “black market consumption, money-laundering, evasion and corruption”.

Yet consumer and retail groups cheered the proposal. “This will satisfy the demands of high-end tourists who are used to using cash for their payments,” said Lino Enrico Stoppani, president of Fipe, a retail group.

“It will also give momentum to the first signs of economic momentum we are witnessing”.

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