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Published: Thursday December 12, 2013 MYT 12:05:02 AM
Updated: Thursday December 12, 2013 MYT 12:06:08 AM

Italian PM Letta wins first leg of confidence vote

Newly appointed Italian Prime Minister Enrico Letta speaks at the Lower house of the parliament in Rome, April 29, 2013. REUTERS/ Alessandro Bianchi

Newly appointed Italian Prime Minister Enrico Letta speaks at the Lower house of the parliament in Rome, April 29, 2013. REUTERS/ Alessandro Bianchi

ROME (Reuters) - Italy's Prime Minister Enrico Letta won a confidence vote in parliament's lower chamber on Wednesday after urging lawmakers to back his government or risk chaos

Opening a debate before his third confidence vote since October, he 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 attempts to squeeze costs and boost revenues.

"I will do everything I can. I won't give in to those who say the chaos is too much and we can't do anything," he said, pledging to combat a growing tide of political disillusion and hostility to the European Union.

The lower house, dominated by Letta's centre-left Democratic Party (PD), passed the confidence motion as expected. The coalition is also expected to win in the upper house, with the help of Interior Minister Angelino Alfano's New Centre Right and a smaller centrist group.

Letta pledged to fight "like a lion" but the problems he faces include youth unemployment running at more than 40 percent. The economy is now smaller than it was more than a decade ago and obstacles range from rampant corruption and a discredited political system to a level of tax evasion which the head of Italy's tax authority said this week was incompatible with a democratic state.

As Letta spoke, police had shut down parts of Rome with hundreds of protesters gathering near parliament, shouting "Thieves! Thieves!".

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.

The upper house would become a review chamber linked to the regions instead of an exact counterweight to the lower house, removing a major cause of stalemate in Italy's political system.

On the economic front, he gave little detail but promised to cut Italy's public debt, the second highest in the euro zone as a proportion of the overall economy. In addition, he would lower taxes on families and companies, reduce unemployment and boost public investment, with a package of measures to attract foreign investment due to be approved by cabinet on Friday.

Many of these goals echoed those made when he took office in the spring, but so far a quarrelsome ruling coalition has hindered progress.

He promised privatisations and said the government would consider allowing employees to buy shares in the postal service and other public companies.

CONFIDENCE VOTE

Letta called the confidence vote to confirm his majority after former prime minister Silvio Berlusconi, now banned from parliament after a conviction for tax fraud, ended seven months of cooperation with the centre-left by pulling his Forza Italia party out of the coalition.

Letta 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.

Renzi, the ambitious young mayor of Florence, is expected to lead the party into the next election. He 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.

However a source in Renzi's inner circle said after the speech that the two centre-left leaders were in accord over the next steps. "Letta's fine like that, it's what we'd agreed," the person said.

Letta said a formal coalition pact setting out the priorities for 2014 should be prepared in the next few weeks but the government had become stronger since Berlusconi moved to the opposition benches.

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 requiring approval before the end of the year.

Italy has enjoyed a respite from the financial market tensions that have plagued it in recent years. The main barometer of market confidence, the difference between yields on Italian 10-year bonds and safer German Bunds, fell to its lowest level in more than two years this week.

On Tuesday, national statistics agency Istat reported a rise in industrial output for October and revised third-quarter gross domestic product to show zero growth after two years of steady decline.

However, the protests by a loose movement led by farmers and truckers in many Italian towns and cities this week have underlined public anger over the policies imposed to improve public finances and keep them within European Union rules.

(Additional reporting by Silvia Ognibene and Cristiano Corvino, editing by Mark Trevelyan)

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