June 28, 2012 / 2:31 PM / 5 years ago

UPDATE 1-Italy's Monti under pressure, president worried

* Parties warn Monti they want "results" from EU summit

* President says worried by mounting political conflict

* Confindustria says economy in "abyss", slash forecasts

* Borrowing costs hit six-month high at auction

By Gavin Jones

ROME, June 28 (Reuters) - The euro zone debt crisis risks becoming a political crisis for Italian Prime Minister Mario Monti, who is facing mounting pressure to achieve results to ease Italy's borrowing costs at the European Union summit that started on Thursday.

President Giorgio Napolitano said he was worried by the increasing conflicts among the parties who back Monti in parliament, with speculation continuing to swirl over the risk that the government could fall within a few months.

Napolitano said in a statement that he welcomed the fact that Monti had broad parliamentary backing to negotiate at the Brussels summit. "However it is worrying that at the same time the disputes and conflicts are increasing among the parties that support the government," he added.

The centre-left Democratic party (PD) and former Prime Minister Silvio Berlusconi's centre-right Party of Freedom (PDL) are demanding that Monti obtain backing for pro-growth measures at the summit to ease Italy's economic recession, as well as steps to limit its rising borrowing costs.

The country's plight was highlighted on Thursday by employers' lobby Confindustria, who said the economy was "in the abyss", and would contract by 2.4 percent this year, twice as much as the government's official forecast.

The budget deficit would also fall far more slowly than Monti has promised, Confindustria warned.

The rival political parties agreed to back Monti at the head of an unelected government rather than go to elections when a discredited Berlusconi fell from office last November with Italy on the verge of a Greek-style debt default.

However, they already have their eyes on the next election which must be held by next spring, and are happy to blame Monti as Italy's economic and financial difficulties continue to rise.


The parties are also internally divided between factions that are keen to pull the rug on Monti and others that support him, adding to a confused and unstable picture.

"Monti has prestige, but he must also bring home results," Angelino Alfano, national secretary of Silvio Berlusconi's PDL said on Thursday.

"We are asking for two measures: criteria that allow more public investments that today are zero in all of Europe, and a mechanism that puts a ceiling on the spread" between Italian bonds and safer German Bunds.

PD leader Pier Luigi Bersani also said Monti should fight to have some public investments stripped from budget deficit calculations.

So far Monti's efforts to have such policies adopted at the EU level have been firmly rebuffed by Germany, the region's strongest economy and paymaster.

Monti's popularity has fallen steadily this year as recession has deepened and Italians have felt the weight of austerity measures made up largely of tax hikes.

His approval rating stood at just 33 percent, according to a poll published this week by the SWG agency, compared with 71 percent when he took office in November.

However the picture for the parties is even bleaker and despite his weakness, Monti still remains more popular than any other political leader.

The same SWG poll showed that the PDL, the former ruling party, would come in third behind the PD and the rebel by Star Movement led by the former comedian Beppe Grillo.

Italy's benchmark borrowing costs hit six-month highs at auction on Thursday, piling further pressure on Monti, reflecting fears the summit will not offer convincing solutions to the euro zone's two and a half year old debt crisis.

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