The announcement ended days of indecision and wrangling within the coalition, which was split between those wanting a complete shutdown and those pressing for more limited action to help struggling businesses and to allow some family reunions.

"The situation is difficult across Europe. The virus continues to circulate everywhere," Conte told reporters on Friday.

"Our experts were seriously worried that there would be a jump in cases over Christmas ... We therefore had to act but I can assure you it was not an easy decision."

Under the new rules, non-essential shops will be shuttered between December 24-27, December 31- January 3 and January 5-6. On those days, Italians will only be allowed to travel for work, health or emergency reasons.

However, limited visits will be allowed, for example to see elderly parents living alone.

Shops can open between December 28-30 and on January 4 and people will be free to leave their houses at that time. However, throughout the holiday period, all bars and restaurants must remain closed.

Conte promised 645 million euros ($A1 billion) compensation to help the hospitality sector, which has been savaged by the 10-month health crisis.

Italy was the first Western country to be badly hit by the virus in February and as of Friday, 67,894 people had died as a result of the disease, the highest toll in Europe.

Following a summer lull, infections soared in October, forcing new curbs. These have since largely been loosened but the government has grown increasingly concerned the Christmas break might spark an uncontrolled spread of the virus.

Australian Associated Press