Italy will invest one billion euros ($1.2 billion) in a joint deal with ArcelorMittal to rescue the country's struggling Taranto steel plant, the steel giant said Friday.

The agreement allows ArcelorMittal, the world's largest steel maker, to maintain partial control over production in Italy and avoids the shuttering of the plant, which employs thousands of people.

Under the deal, production will be refocused on lower-carbon steelmaking technologies.

-The agreement provides for a significant financial commitment from the Italian state and represents an important step towards the decarbonisation of the Taranto plant- Italy's economic development minister, Stefano Patuanelli, said in a statement.

Maurizio Landini, leader of the CGIL, Italy's main trade union, called it a "positive move".

ArcelorMittal had announced in 2018 that it was buying Ilva, but backtracked the following year following legal issues relating to the expensive clean-up of the heavily-polluted site.

Italy's government has been desperate to save the Taranto plant, an important employer in the south, since the debt-ridden Ilva was placed under judicial administration in 2015.

The new deal provides for a capital increase of AM InvestCo, ArcelorMittal's subsidiary, which will acquire the remains of Ilva, according to a press release from ArcelorMittal.

Invitalia, a state-owned investment agency, will put in 400 million euros by the end of January, followed by a second tranche of 680 million euros that will leave it with a 60-percent share.

ArcelorMittal will also invest 70 million euros for a 40 percent stake, it said.

The future entity, which aims to produce eight million tonnes of steel in 2025, "involves a series of public support measures, including ongoing government-funded employment support," said the press release.

ArcelorMittal said in June that it would cut about 5,000 jobs out of approximately 11,000 ex-Ilva workers.