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Italy's Letta wins confidence vote after pledging growth drive

Deputy leader of Italy's centre-left Democratic Party (PD) Enrico Letta talks during a news conference at Montecitorio palace in Rome April
Deputy leader of Italy's centre-left Democratic Party (PD) Enrico Letta talks during a news conference at Montecitorio palace in Rome April

By James Mackenzie

ROME (Reuters) - Italy's new Prime Minister Enrico Letta won his first vote of confidence in parliament on Monday after promising to press for a change to the European Union's focus on austerity and pursue economic growth and jobs.

Letta said Italy could not afford to focus simply on trying to cut its huge public debt and needed a new emphasis on lifting the economy out of recession.

The confidence motion in his right-left coalition government easily passed as expected, by 453 votes to 153 in the Chamber of Deputies, the lower house.

Letta was backed by his own centre-left Democratic Party (PD), Silvio Berlusconi's centre-right People of Freedom (PDL) party as well as centrists led by former prime minister Mario Monti. The government will be fully empowered after a second vote in the Senate on Tuesday.

However, the first opinion poll published since his cabinet was announced, conducted by the EMG agency, gave Letta an approval rating of just 41 percent, showing that many Italians are unconvinced by the coalition of former adversaries.

Just 13 percent of Italians said they wanted Letta as prime minister, suggesting he may struggle to obtain the honeymoon period usually enjoyed by new governments. Monti began his government with approval ratings as high as 70 percent.

"We will die of fiscal consolidation alone, growth policies cannot wait any longer," Letta said in his speech to the Chamber of Deputies, describing the country's economic situation as still "serious" after more than a decade of stagnation.

POSITIVE REACTION

Financial market reaction to Letta's appointment and the end of months of political stalemate in the euro zone's third largest economy has been positive, with bond yields falling and shares rising.

Italy's cost of borrowing dropped to its lowest since October 2010 at an auction of mid and long term bonds.

Letta, a 46-year-old moderate with strong contacts outside Italy, pledged to stick to Rome's budget commitments to its European Union partners, announcing he would visit Brussels, Paris and Berlin this week.

He joined the growing numbers of European politicians attacking the former consensus on budget austerity but offered few specific proposals about how to restore growth to Italy's economy, which has shrunk below the level it was in 2001.

"We all have the clear and strong feeling that our destiny will be the destiny we want only if the choices Europe makes are different from the choices made up to now," he said.

Stefano Fassina, the PD's main economic spokesman, said Letta should renegotiate Italy's budget target to gain more breathing room. "Other countries have done it and so should we," he said in parliament.

Letta was pushed into a coalition with Berlusconi after the centre-left fell short of a viable parliamentary majority in February's inconclusive election, which left no side with the numbers to govern alone.

Berlusconi, who is fighting legal battles over a tax fraud conviction and charges of paying for sex with a minor, will not be in cabinet but will exercise a powerful influence behind the scenes, to the disgust of many on the left who find the idea of working with their old enemy abhorrent.

POINTS OF CONFLICT

In a speech that ranged from tax to constitutional reform and touched on issues including tourism, prisons and two Italian marines at the centre of a diplomatic standoff with India, Letta avoided points of conflict between members of his coalition.

He made no reference to a law tackling conflicts of interests, which was promised by his PD party before and after the election but would be unacceptable to media tycoon Berlusconi, who has staked a claim to chair a special commission examining institutional reforms.

Responding to centre-right demands for an unpopular housing tax to be scrapped, Letta said payments due in June would be halted although he did not promise to abolish the tax altogether as Berlusconi has demanded.

He hoped a planned increase in sales tax, which would see the main rate rise from 21 percent to 22 percent in July, could be delayed and said payroll taxes that dissuaded companies from hiring should be lowered.

He did not indicate how he would pay for tax changes, which together with proposed measures to extend unemployment protection would require as much as 10 billion euros ($13 billion) in 2013.

The current electoral law, which contributed heavily to the inconclusive election result in February would be changed before the next election and he proposed a special commission to consider other political and constitutional reforms.

(Additional reporting by Catherine Hornby, Gavin Jones, Steve Scherer, Naomi O'Leary; Editing by Giles Elgood)

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