By Steve Scherer
ROME, May 22 (Reuters) - Italy's new government, already sinking in opinion polls and riven by internal disputes, on Wednesday began preparing a plan to address one of the main causes of public anger - soaring unemployment among young people.
But the left-right coalition's room for manoeuvre to tackle the problem is restricted by Europe's second-biggest debt, the longest recession in at least four decades and a long list of campaign promises to fulfill.
In a closed-door meeting with unions and employers, Labour Minister Enrico Giovannini proposed mainly low-cost remedies to turn around unemployment among 15 to 24-year-olds which now stands at nearly 40 percent.
'We discussed numerous proposals,' Giovannini told reporters after the meeting, without going into details. He said that by the end of June the plan would be ready in order to give companies a clear idea of new rules before the summer break.
In the meeting Giovannini said the government aimed to tweak hiring rules to make them more flexible and seek more funding for a European Union job-training programme, according to a union source present at the talks.
The labour minister also said he was studying fiscal incentives for new hires if, at the end of the month, the European Union says Italy is no longer under special surveillance for its public finances, the source said.
Giovannini did not say how much Italy may spend on the tax breaks and he also warned unions and employers that a weak economic recovery expected toward the end of the year would not be enough to reverse youth joblessness, according to the source.
The coalition between Prime Minister Enrico Letta's centre-left Democratic Party (PD) and Silvio Berlusconi's centre-right People of Freedom (PDL) party was formed last month but has already run into trouble.
Berlusconi is besieged by court cases, Letta's party is badly split over whether it should even be in an alliance with the scandal-plagued media magnate, and the two factions bicker openly on a daily basis.
The government's approval rating fell last week to 34 percent from 43 percent just two weeks earlier, according to an SWG poll.
What little cash Letta had to spend has gone on suspending a property tax to satisfy Berlusconi's demands, and funding subsidies for idled factory workers, a programme dear to the left-wing unions.
But Letta has said youth unemployment is his top priority and after a summit of European Union leaders in Brussels on Wednesday he said the issue had been made - at Italy's request - a central theme of the next meeting of European leaders in June.
'The objective is to find a remedy for the total uncertainty our young people now face for their future,' he said.
In the national election three months ago, young people voted overwhelmingly for political change by seating the youngest parliament in post-war history. But the older PD party leaders and 76-year-old Berlusconi are still pulling the strings behind the scenes.
Though short on political clout, young lawmakers do not hesitate to underscore the plight of their generation and what is at stake.
'It is clear that if we don't act now to create jobs for young people, in 10 years time there won't be enough workers to pay their own parents' pensions, and the country will be dead,' Anna Ascani, a 25-year-old PD lawmaker, told Reuters.
Italy has the third-oldest average population in the world, behind Japan and Germany, and there are only three working-age people for every pensioner, the second lowest proportion globally behind Japan, United Nations data show.
More than 60 percent of young Italians expect to be poorer than their father and mother were, and 38 percent live with their parents because they cannot afford their own housing, according to a study by pollster SWG published on Tuesday.
A separate report by the national statistics institute ISTAT said millions of Italians cannot afford to heat their homes properly or eat meat, driving home the magnitude of the economic challenge confronting the Letta government.
(Additional reporting by Francesca Piscioneri and Gavin Jones; Editing by Barry Moody and Mike Collett-White) Keywords: ITALY POLITICS/YOUTH
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