Halep was due to headline a field which also includes the likes of Johanna Konta, Petra Martic and Marketa Vondrousova; but due to concerns about the pandemic especially in her home country Romania, she has decided against it.
In a Twitter post, she wrote: "Given the recent rise in Covid19 cases in Romania and my anxieties around international air travel at this time, I have made the tough decision to withdraw from Palermo. I want to thank the tournament director and the Italian ministry of health for all efforts on my behalf."
The move comes after Italy's health minister on Friday signed an ordinance requiring all those who have in the last 14 days stayed in Romania or Bulgaria to quarantine.
"We were filled with regret when informed of the news,'' tournament director Oliviero Palma said. "We had informed Halep's staff in detail about the fact that professional players shouldn't have to go into quarantine.
"But nevertheless Halep's staff informed us when their decision was already taken. We are disheartened and deeply upset."
Palma also said that a regional health minister had sent Halep a notice explaining that the government ordinance does not apply to workers, and therefore to professional athletes.
The two-time Grand Slam champion has not played since beating Elena Rybakina in March's Dubai final. She has also been announced for the Prague Open on August 10 but whether the World No.2 appears in the capital of the Czech Republic remains to be seen.
Former Wimbledon finalist and Canadian ace, Eugenie Bouchard has also been announced for the Prague Open as a wildcard so far having competed in multiple tournaments including the World Team Tennis since the pandemic began.
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