Obama hails Renzi's Italian reforms, criticizes EU austerity

ROME (Reuters) - Barack Obama praised Matteo Renzi in a newspaper interview on Tuesday, endorsing the under-fire Italian Prime Minister's reform agenda ahead of his state visit to Washington and a referendum that will define his political legacy.

Renzi has said he will resign if he loses the Dec. 4 plebiscite on constitutional reform, in which two of his predecessors said on Tuesday they would support the 'no' camp - along with what opinion polls say is a majority of Italian voters.

"I believe the austerity measures have contributed to slowing growth in Europe," the U.S. president told la Repubblica daily, adding that Renzi understood the need for reforms to increase productivity and stimulate investments.

Renzi, who was visiting Washington on Tuesday, has set out a 2017 budget that targets a fiscal deficit higher than previously agreed with the European Union.

Obama said European policies aimed at capping budget deficits and lowering debt had led to years of stagnation and high unemployment in several countries.

"That is why I believe the vision and the ambitious reforms Prime Minister Renzi is following are so important," he said. Renzi "recognizes the need to make the investments necessary to sustain growth and jobs and increase opportunities."

Renzi's reforms in areas such as the labor market, the state bureaucracy and education have so far failed to boost Italy's chronically sluggish growth and his popularity has fallen over the last 18 months.

The referendum is on his plan to overhaul the constitution by reducing the role of the Senate and cutting the powers of regional governments. A large majority of recent opinion polls put the "no" camp ahead.

Former prime minister Mario Monti, whose austerity measures are widely credited with saving Italy from a debt crisis in 2011 and 2012, said on Tuesday he would vote "no".

He told Corriere della Sera daily the new role of the Senate was unclear and criticized Renzi for what he said was an irresponsible budget that undermined public finances by offering hand-outs to persuade people to support the referendum.

Another former prime minister, media tycoon Silvio Berlusconi, also declared his support for the "No" camp.

"After a "No" we can approve a real reform, a different reform, all together," Berlusconi told Canale 5 television, adding this should include reducing the number of deputies in the lower house, and a constitutional limit on taxation.

Brussels will issue a verdict this year on the budget. European Commission officials are concerned about Italy's inability to bring down a public debt of around 133 percent of national output, the highest in the euro zone after Greece's.

However, they are also reluctant to hurt Renzi ahead of the referendum which they fear could bring political instability if he loses and favor the rise of the euroskeptic 5-Star Movement.

(Reporting by Gavin Jones, additional reporting by Isla Binnie; Editing by Robin Pomeroy and John Stonestreet)

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