By James Mackenzie
ROME (Reuters) - Italian Prime Minister Enrico Letta promised on Monday to present a formal coalition pact in January with reforms ranging from an overhaul of the electoral law to cuts to bureaucracy and taxes.
Letta, appointed to head a grand coalition of left and right after last February's deadlocked elections, said 2014 would be the year in which a new generation of leaders could launch reforms to pull Italy out of two decades of stagnation.
"I have been part of this change and I feel the full weight of responsibility. This generation will have the opportunity of changing Italy and I am convinced it can do it," 47-year-old Letta told the traditional end-of-year news conference.
"We have the most complex part of this crisis behind us and we have to be in a position to take advantage of some important opportunities," he said.
Italy, one of the world's biggest government debtors, has narrowly escaped being sucked into the euro debt crisis as investors worry about its weak economy and chaotic politics.
Letta dismissed suggestions that his authority could be undermined by the election of Matteo Renzi as head of his centre-left Democratic Party (PD), saying the 38-year-old Renzi's arrival was part of an "unprecedented" generational change in Italian politics.
"This new generation will play a team game in a different way," he said, shortly before the 2014 budget cleared its final parliamentary hurdle in a confidence vote in the Senate.
Letta was speaking shortly before the Senate completed parliamentary approval for the 2014 budget after it cleared the lower house on Friday.
He said a new pact for his coalition government to be worked out in detail in January would address issues ranging from cutting taxes that deter companies from hiring to easing citizenship laws for the children of immigrants.
An overhaul of both the current electoral law and a parliamentary system that makes it difficult for any party to win a stable governing majority would come before European parliamentary elections in May, he said.
Letta's coalition, built around the PD and a smaller center-right group led by Interior Minister Angelino Alfano, has promised reforms to boost growth in 2014 and says it is more cohesive since a break with Silvio Berlusconi, who pulled out of the government last month.
However, data on Monday showing a sharp drop in consumer confidence for December underlined how hard it will be to revive an economy that has shrunk by more than 9 percent since 2007.
The election of Renzi, the mayor of Florence who has made no secret of his ambition to become the next prime minister, has added a new uncertainty to the mix with widespread speculation that he may seek to engineer an early election to take advantage of his strong standing in the opinion polls.
Renzi has pressed the government to move more quickly on issues ranging from electoral reform to overhauling employment laws, opening the way for a delicate phase of negotiations in coming weeks as the parties work out a formal coalition pact.
Reforming citizenship laws to make it easier for children of immigrants to take Italian nationality, a measure strongly opposed by the centre-right, will be particularly complicated but Letta said a change would send an important signal.
He also said he wanted to modify a law passed under a previous centre-right government which penalizes those found guilty of aiding clandestine immigration but which has been criticized widely for hampering efforts to rescue migrant boats in distress in Italian waters.
He said the extra credibility his government had won in the eight months of its existence had already cut borrowing costs for Italy with interest payments on its 2 trillion euro ($2.7 trillion) debt expected to reach 83 billion euros in 2013, down from an estimated 89 billion euros forecast last year.
($1 = 0.7296 euros)
(Reporting By James Mackenzie and Steve Scherer Editing by Jeremy Gaunt/Ruth Pitchford)