Italy's biggest labour union threatened on Saturday to step up strikes to protest against plans to open up the job market that the government says will encourage investment.

The plans would make it easier for firms to hire and fire. After running into opposition from unions and allies on the centre-left, the technocrat government on Friday decided to take them through parliament, a process that could take several months, instead of passing them by decree.

Susanna Camusso, the leader of the radical left-wing 6-million-strong CGIL, vowed to press ahead with plans for 16 hours of strikes, including a full-day nationwide stoppage.

These labour reforms do not create a single new job, she said on the sidelines of a business conference on Lake Como.

This is not going to help revive growth. Growth is a result of rigorous investment policies ... If anything, the strike has to be toughened, and substantially.

Unions are particularly angered by a proposal that would weaken an obligation for companies to re-hire workers if a court rules they have been wrongfully laid off, and allow employers to offer monetary compensation when facing economic difficulties.

The centre-left Democratic Party (PD), which is historically tied to the CGIL and one of the key backers in parliament for the technocrat government of Mario Monti, has also vowed to amend the much-contested measure.

We cannot accept money as the only way-out for lay-offs due to economic reasons, PD leader Pier Luigi Bersani told reporters at the conference. We won't budge on this point.

TENSIONS

Bersani said the chance to discuss the bill in parliament should help to avoid tensions.

Labour Minister Elsa Fornero told the conference in Cernobbio that the reform would make Italy's stagnating economy more attractive for corporate investments and boost employment, at least from 2014.

The labour reform is a pillar of the effort this government is making. It is needed to bring Italy back into a normal competitive environment as Italian companies are not only competing domestically, they also compete globally, said Enrico Cucchiani, chief executive of Italy's largest retail bank IntesaSanpaolo, who attended the conference.

Italy is already in recession and the central bank expects output to contract by at least 1.2 percent this year.

Monti hopes to revive growth in the euro zone's third-largest economy through structural reforms, but is facing his toughest test in trying to weaken job protection rules secured by the unions in the 1970s.

After barely growing over the last decade, Italy needs to boost output to reduce a debt pile running at 120 percent of gross domestic product.

Markets are closely watching its progress after the appointment of Monti's government, coupled with the European Central Bank's liquidity largesse, helped to boost investor demand for its sovereign debt.

World investors have returned to finance us based on the credible promise that our public finances are in order and the credible hope that our economy can shift up a gear, Deputy Economy Minister Vittorio Grilli said at the conference.

(Additional reporting by Lisa Jucca in Cernobbio and Catherine Hornby in Rome; Editing by Kevin Liffey)