Italy's 5-Star says it will stay in govt but sets policy conditions

By Gavin Jones and Angelo Amante

ROME (Reuters) -Italy's 5-Star Movement intends to remain in the coalition government but wants a series of policy revisions, party leader Giuseppe Conte said on Wednesday, piling pressure on Prime Minister Mario Draghi.

"We are willing to share government responsibility as we have done so far in a loyal and constructive way, but we want major changes," Conte told reporters after meeting Draghi.

There had been reports that the party, which is sinking in the polls and has just suffered a schism, may pull out of government as relations between Draghi and Conte have soured over the war in Ukraine and domestic economic policy.

Draghi last week denied reports he had asked 5-Star's founder, comedian Beppe Grillo, to remove Conte as leader, and said if the group quit his "national unity" coalition he would step aside as prime minister.

Among the demands in a document he handed to Draghi, Conte said 5-Star had called for the government to immediately cut labour taxes and provide assurances about the future of the "citizens wage" poverty relief scheme, a 5-Star flagship policy.

Conte said Draghi had asked for some time to consider the party's requests. There was no immediate comment from the prime minister's office.

Things may come to a head as early as Thursday, when a parliamentary confidence vote is due to be held on a package of measures including a plan for a new garbage incinerator in Rome, which 5-Star strongly opposes.

The 5-Star document, which was released to reporters, said the party felt "deeply uneasy" in the government and wanted more emphasis on green policies and measures to reduce inequality.

It called for the introduction of a minimum wage, curbs on the use of temporary work contracts, and demanded assurances on the future of incentives for energy-saving home improvements.

However it made no reference to further arms shipments to Ukraine, something 5-Star has opposed but on which Draghi has shown no sign of relenting.

Political tensions in Draghi's coalition have been rising in recent months ahead of a national election due early next year, and 5-Star is not the only party demanding change.

The right-wing League, like 5-Star, has been steadily losing support in polls, and its leader Matteo Salvini told Draghi last month that he might quit the coalition in September unless his party's positions were better reflected in policy making.

He did not specify what changes he wanted, but mentioned immigration, tax, pensions and judicial reform.

(Reporting by Gavin Jones; Editing by Crispian Balmer)