UPDATE 1-Italy hails debt fall but unemployment rises before election

    * Italy posts 2017 growth of 1.5 pct, strongest since 2010
    * Deficit, debt decline but could be revised up
    * Unemployment rate rises to 11.1 pct

 (Adds economy minister, background, combines stories)
    By Gavin Jones
    ROME, March 1 (Reuters) - Italy posted relatively firm
economic growth of 1.5 percent last year and public finances
improved, but unemployment rose unexpectedly just three days
before a parliamentary election, data showed on Thursday.
    The rise, the strongest since 2010, compares to 0.9 percent
in 2016, the national statistics bureau ISTAT reported. The 1.5
percent growth the government is targeting this year would see
Italy continuing to lag virtually all its euro zone partners.
    "We are leaving public accounts in order and growth is back
to its pre-crisis rates," tweeted Economy Minister Pier Carlo
Padoan, who is running with the ruling Democratic Party (PD) in
Sunday's vote.             
    The election is likely to yield a hung parliament, according
to opinion polls, and the PD, whose support has fallen over the
last year, is expected to fare badly behind a centre-right
coalition and the anti-establishment 5-Star Movement.
    Under the PD, Italy emerged in 2014 from its steepest
post-war recession. However, it has remained among the most
sluggish economies in Europe, and GDP is still almost 6 percent
lower than it was before the international financial crisis in
    Moreover, poverty has increased even during the modest
economic recovery and unemployment remains significantly higher
than the euro zone average.
    The jobless rate rose in January to 11.1 percent from 10.9
percent the previous month, its first increase since July,
separate data showed on Thursday. Unemployment in the euro zone
as a whole moved in the other direction, Eurostat reported,
posting a nine-year low of 8.6 percent.
    Nonetheless, the Italian data was more encouraging than the
headline number suggested. The unemployment rate only increased
because more people entered the labour market to look for work,
and 25,000 more jobs were created compared with the month
    Politically sensitive youth unemployment, measuring
job-seekers between 15 and 24 years old, fell for the fourth
month running to 31.5 percent, its lowest level for six years.
    Temporary jobs increased while permanent contracts declined,
continuing a long-running trend.
    Italy's budget deficit came in at 1.9 percent of GDP last
year, down from 2.5 percent the year before and below the
government's target of 2.1 percent.
    However, ISTAT cautioned that the budget deficit, as well as
public debt, could be revised up because they do not include
money used by the government to save two failing regional banks
in northern Veneto.
    The debt - the highest in the euro zone after Greece's as a
proportion of GDP - fell last year to 131.5 percent of output,
ISTAT said, from a record high of 132.0 percent in 2016.
    Chronically slow growth has made it hard for Italy to cut
its debt, and all the main parties at the election say if they
win power they will push for the EU to relax its so-called
"fiscal compact," which mandates severe fiscal consolidation for
high-debt countries like Italy.

 (Editing by Jon Boyle)