By Valentina Za and Giancarlo Navach
CERNOBBIO, Italy (Reuters) - Italian business leaders called on the country's new government on Friday to restore incentives for investment and to support economic growth, while keeping public finances in check.
The country's economy flirted with recession under the previous ruling coalition, which collapsed last month after infighting and repeated confrontations with Brussels over increased budget spending.
Business leaders gathered on the shores of Lake Como for the annual Ambrosetti forum were cautiously hopeful that conditions could improve under the new coalition between the centre-left Democratic Party (PD) and anti-establishment 5-Star Movement.
"This government will definitely do more than the previous one, that's not at all hard," said Alberto Bombassei, chairman of brake maker Brembo, urging the executive to unblock public works.
Italy's investment spending is equivalent to 2% of gross domestic product, a third less than at the start of the decade. Private investments are also below pre-crisis levels having shrunk by 30% between 2007 and 2013, according to the Bank of Italy.
Businesses said they hoped for a new version of an incentive scheme for investment and innovation introduced by the former centre-left government, which was phased out by the recently collapsed coalition in order to raise money to send people into early retirement and provide a basic income for the poor.
"The government needs to pay closer attention to both foreign and domestic investments in the country," said Claudio Brandolino, chief financial officer at the Italian arm of French IT services firm Atos.
"The Industry 4.0 package was a good starting point," he said in reference to the centre-left's incentive scheme.
The PD-5 Star coalition, however, has little room for manoeuvre. It must cut spending or find alternative revenues for 23 billion euros (20.6 billion pounds) to defray a scheduled sales tax increase next year, which businessmen in Cernobbio said had to be avoided at all costs.
It has promised the 2020 budget, a draft of which must be presented to Brussels by mid-October, will be expansionary without jeopardising public finances.
Fiscal discipline is necessary to keep the cost of refinancing Italy's 2.3 trillion euro public debt near the record lows it hit this week when markets welcomed the new pro-European government.
"The fall in (bond yield) spreads is a positive sign, but public debt must be reined in," said Andrea Costantini, vice president of Agrati Group, a family-owned maker of fastening systems for the automotive sector based north of Milan.
With a question mark hanging over how workable a coalition comprising two former bitter enemies will turn out to be, the desire for political stability topped some people's wish list.
"Political stability is the key element for foreign investments, even more than incentives which you could not otherwise be sure are there to stay," Pfizer Italia CEO Massimo Visentin said.
(Additional reporting by Elvira Pollina, Gianluca Semeraro and Giselda Vagnoni; editing by John Stonestreet)
