By James Mackenzie
ROME (Reuters) - Facing rumors that he could face pressure to quit, Italian Prime Minister Matteo Renzi hit back on Sunday against criticism from business leaders and dared his opponents to challenge him in parliament.
"If they think they have the numbers and the right candidate, let them try it," the 39-year-old center-left prime minister told the left-leaning La Repubblica daily.
Renzi came to office in February as Italy's youngest-ever prime minister after forcing out his predecessor Enrico Letta, who was widely seen to have lost the confidence of the business establishment and key opinion formers over his government's lack of progress.
Just seven months later, he too faces criticism over the slow pace of reforms, fanning speculation in political circles that he could be forced to step down in favor of a technocrat government led by central bank chief Ignazio Visco.
Although he won an emphatic victory in European parliamentary elections in May and remains by far the country's most popular politician, he has come under mounting pressure as Italy faces recession, soaring unemployment and a towering debt.
Demands are growing for swifter action to match his ambitious reform promises and calls for a more expansive and growth-friendly interpretation of European Union budget rules.
After days of attacks from establishment voices ranging from the Corriere della Sera newspaper to business leaders and Catholic bishops, Renzi came out fighting in his newspaper interview. He brushed aside any suggestion of an early end to the government, whose five-year term runs until February 2018.
On Monday, at a meeting of his Democratic Party, he is expected to take on leftist critics angered by his plans to scrap some job protection guarantees as part of a drive to redraw labor market rules.
With the European Central Bank keeping interest rates low, Rome currently has no problem servicing its 2 trillion euro ($2.54 trillion) debt. But Italy is already tasting deflation, and even normally optimistic government forecasts are pointing towards the economy contracting this year.
If the trend continues, many economists and commentators fear, Italy risks ending up under the administration of the joint European and IMF "troika" that bailed out Greece at the price of years of harsh austerity.
"He should think that behind him, there is a country that does not want to see the risk of any foreign banner being raised (read troika)," the Corriere della Sera said in an unusually harsh and widely discussed editorial last week.
Renzi, who has increasingly positioned himself as a foe of vested interests in both the traditional business lobbies and the leftist trade unions, attacked the elites known as the "poteri forti" or "strong powers".
"I govern without them. Not against them, just without them. Without asking for their advice or paying homage," he said, accusing them of standing by in silence for 20 years as Italy gradually lost competitiveness.
The actual influence of groups such as industrial lobby group Confindustria, the Church or media organizations like the Corriere della Sera in Italian politics is much disputed.
But speculation over their role has been fueled by the chronic political impasse in Italy which has seen four prime ministers in four years. Only one of them, Silvio Berlusconi, won power after a clear election victory.
The Democratic Party holds an absolute majority in the lower house but in the upper house depends on support from small center-right and centrist groups which have pressed the prime minister to move more quickly on labor reform.
Renzi promised to push on with overhauling the labor code, taking particular aim at the symbolically important Article 18, which protects workers in larger companies but does not cover those on short-term contracts or in smaller firms.
Fiercely defended by unions, whose shrinking power base lies in Italy's declining heavy industry and public service, the article is attacked by business, which says it deters companies from hiring workers, as well as by critics who say it unfairly disadvantages workers not protected by the system.
(1 US dollar = 0.7885 euro)
(Reporting by James Mackenzie; Editing by Mark Trevelyan)