By Catherine Hornby
ROME (Reuters) - Italian Prime Minister Mario Monti hit back at the increasingly critical employers lobby Confindustria on Sunday, saying that its complaints about the government were helping to push up Italian borrowing costs and damaging companies.
Confindustria's new leader Giorgio Squinzi has branded the government's labor reform inadequate, warned that recession is deepening and called for more help for small firms since he took over in May.
On Saturday, he took sides with the leader of Italy's biggest union CGIL, Susanna Camusso, during a debate after she criticized spending cuts approved by the government this week.
Asked for a response on the sidelines of a conference in southern France on Sunday, Monti said Squinzi was not helping to improve conditions for Italian firms.
"I would propose to not damage Italian companies by making declarations like this which, as has happened in past months, push up the spreads and interest rates not only on Italian debt but also for firms," he told reporters in France.
As the principle voice of Italian business, Confindustria plays an important role in shaping the political debate in Italy, and it clashed frequently with former Prime Minister Silvio Berlusconi during the last months of his government.
Monti said on Sunday that he was concerned about the return of sovereign bond yields to danger levels last seen before the European Union summit in June, and urged eurozone finance ministers to address the issue.
Yields on Italian 10-year debt have risen above 6 percent this week, while Spanish yields have topped the 7 percent mark widely seen as unsustainable in the long term.
Rising yields increase the government's already sizeable interest payments and increase the cost of funding for banks, which in turn leads to more expensive credit for companies.
Seeking to keep a lid on public finances, Italy's cabinet approved additional spending cuts on Friday, and said the savings would enable it to delay a planned sales tax rise until next year.
Postponing the unpopular increase in value added tax could be a way for Monti to revive his approval ratings, which are hovering near their lowest level since he took office in November.
But the new cuts, which will reduce health expenditure and trim the number of public sector workers, have drawn fire from unions and Camusso has proposed a nationwide general strike.
(Additional reporting by Leigh Thomas in Aix-en-Provence; Editing by Erica Billingham)