UPDATE 1-Bank of Italy chief warns over weak economy
* Bank of Italy governor warns over competitiveness
* Echoes concerns of Fiat CEO Marchionne
* Pinpoints lack of "social capability"
By James Mackenzie
ANCONA, Italy, Nov 5 (Reuters) - The head of the Bank of Italy stepped up his warnings over sluggish domestic growth on Friday, repeating that the country was becoming less efficient than its partners and risked falling further behind.
"We have clearly suffered a loss of competitiveness compared with our European partners," Mario Draghi said, according to the text of a speech at a university conference in Ancona.
The comments contrast with the government's relative optimism about the economy, which has so far avoided the financial market turmoil hitting countries like Greece or Spain, but they echo concerns voiced by business leaders including Sergio Marchionne, head of carmaker Fiat (FIA.MI).
"The difficulty the Italian economy has in growing and producing wealth is a continuing cause of concern," said Draghi, a leading candidate to replace Jean-Claude Trichet next year as head of the European Central Bank.
Draghi said inefficient labour practices, an economy built on small firms without the scale to compete in global markets and an inefficient services sector had all contributed to the long-term decline of the euro zone's third biggest economy.
Private sector labour costs had risen 24 percent in the decade to 2008 while they had fallen in Germany, and productivity had risen just 3 percent in the same period in Italy and 22 percent in Germany, he said.
But Draghi also pointed to a broader issue which he said was a significant factor in the overall problem.
"We have repeatedly drawn attention to a generalised defect in our country, of 'social capability'," he said, quoting the Italian economist Giorgio Fua, in whose honour the conference was being held.
"The term (was) used by Fua to indicate the lack of "a political and judicial framework, a system of values, of social mobility, of the type of education system likely to favour the development of a modern economy,'" he said. His latest comments are unlikely to endear him to the crisis-plagued government of Prime Minister Silvio Berlusconi, who spoke glowingly of his government's economic record in a speech on Thursday.
Draghi has repeatedly highlighted problems in Italy and clashed with Economy Minister Giulio Tremonti, who issued a statement last month criticising the central bank's estimate that Italy's real unemployment rate was significantly higher than official estimates.
The Bank of Italy says Italy's jobless rate, officially 8.5 percent, would be above 11 percent if it included workers sent home on reduced pay and discouraged jobseekers who had given up the search for work.
(Editing by John Stonestreet)
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