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Italian PM Letta seeks parliament's backing for reforms

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[December 11, 2013]  By James Mackenzie

ROME (Reuters)  Prime Minister Enrico Letta called on parliament on Wednesday to back his government or risk chaos as he promised a package of reforms he said would lift Italy's stagnant economy back to growth after two years of recession.

Opening a debate in the lower house ahead of his third confidence vote since October, Letta said Italy had avoided reforms for 20 years and could no longer afford to delay, with protests across the country this week underlining the bitter public mood after years of painful austerity.

"I'm determined to work with everything I have to prevent the country falling back into chaos," he said, pledging to throw his weight behind efforts to fight a growing tide of political disillusion and hostility to the European Union.

He said the next 18 months would be devoted to a broad package of institutional reforms aimed at creating a stable basis for economic growth, which he said should reach 1 percent in 2014 and 2 percent in 2015.

As well as a new electoral law and measures to untangle the conflicting web of powers between different levels of the administration, he promised to overhaul parliament to remove the Senate's power to vote no confidence in the government.


He said the upper house would become a review chamber for legislation passed in the lower house, removing one of the key factors causing stalemate in the Italian political system.

On the economic front, he promised to rein in the deficit, cut Italy's towering public debt, the second highest in the euro zone as a proportion of the overall economy, lower taxes on families and companies, reduce unemployment and boost public investment.

Privatizations would continue and the government would consider allowing employees to buy shares in the post office and other public companies, he said.

Letta called the confidence vote to confirm his majority after Silvio Berlusconi, now banned from parliament, ended seven months of cooperation with the center-left by pulling his Forza Italia party out of the coalition.

The vote in the lower house is expected before 1500 GMT, with the Senate due to vote in the evening.

CONFIDENCE VOTE

Letta, whose center-left Democratic Party (PD) holds a strong lower house majority, is expected to win the vote in both houses with the help of Interior Minister Angelino Alfano's New Centre Right and a smaller centrist group.

The prime minister has said he expects the government to survive until at least 2015 but his task has been complicated by Sunday's election of the 38-year-old Matteo Renzi as head of the
PD.

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Renzi, the ambitious young mayor of Florence, is expected to lead the party into the next election, has said he wants to set his stamp more clearly on the government's agenda and some believe he would like to push for an election more quickly.

Letta said a formal coalition pact setting out the priorities for 2014 should be prepared in the next few weeks but he said the government was now stronger following the withdrawal of Berlusconi's often fractious party and its move to the opposition benches.

"Today the coalition is different, more united," Letta said.

The government has already won two confidence votes in parliament with his reduced majority, most recently over the 2014 budget law, still working its way through parliament and which must be approved before the end of the year.

Italy has enjoyed a respite from the financial market tensions which have hit it repeatedly in recent years, with the main barometer of market confidence, the spread between yields on Italian 10-year bonds and safer German Bunds, falling to its lowest level in more than two years this week.

On Tuesday, national statistics agency Istat also offered a glimmer of hope, reporting a rise in industrial output for October and restating third quarter gross domestic product to show zero growth after two years of steady decline.

However, protests in many Italian towns and cities this week have underlined growing public anger over the austerity policies imposed to keep Italy's fragile public finances under control and in line with European Union budget rules.


(Reporting By James Mackenzie; editing by Stephen Jewkes, John Stonestreet)

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