Rome, December 18 - Premier Enrico Letta said Wednesday that the seeds of Italy's recovery from its longest recession since World War II were developing. "The seeds of the recovery that we have ahead of us are sprouting in these days, in these weeks," Letta said in a video message to national car industry association Anfia.

After eight consecutive quarters of negative growth, the country's gross domestic product (GDP) was flat in the July-September period with respect to the previous three months.

The government forecasts that Italy will return to positive growth in the fourth quarter of this year.

"The fall in GDP has stopped and the interest rates (on Italy's huge public debt) have come down by a significant degree," said the premier, a member of the centre-left Democratic Party (PD).

Letta also said Wednesday that he was confident Italy's economy can grow 1% next year and 2% in 2015.

"Growth of 1% next year and 2% in 2015 is a goal that is within our reach if the interest rates remain low, confidence in Italy remains strong and, obviously, the public accounts stay in order," Letta told a meeting of Italian ambassadors.

Unemployment in Italy has reached record levels of over 12%, with more than four in 10 under-25s out of work during the recession. The downturn was made deeper by EU-mandated austerity measures adopted by the emergency technocrat government of Letta's predecessor, Mario Monti, to avert a Greek-style financial meltdown. Protesters from disparate groups are set to hold a big anti-government, anti-austerity protest in Rome on Wednesday in the culmination of over a week of demonstrations nationwide by the so-called Pitchfork Movement that have caused disruption and in some cases degenerated into violence. Letta is leading calls for Europe to focus increasingly on promoting growth and jobs, while maintaining budget discipline, and has vowed that Italy's duty presidency of the EU will take this forward in the second half of 2014. "Italy won't get bogged down in its role as president (of the EU). It will do more so that Europe takes steps forward," he said, adding the watchwords of Italy's presidency will be growth and jobs. He stressed that it is "not our intention to create more growth by ruining the public accounts".

Letta has promised Italy will keep its deficit-to-GDP ratio within the 3% threshold allowed by the EU.

But he also hit back hard recently when the European Commission said Rome should do more to reduce its public debt of over two trillion euros, around 133% of GDP. Letta said the EU risked "dying of too much austerity". The premier also spoke about the political situation Wednesday, saying his left-right coalition government has been on a roller coaster since it took power, while stressing that it still had big ambitions. Letta's government was cobbled together in April after a long deadlock followed February's inconclusive general election.

Based on an unnatural alliance between the PD and ex-premier Silvio Berlusconi's now defunct centre-right People of Freedom (PdL) party, it veered from one crisis to another for much of the year. Berlusconi's party, which he has revamped under its former name Forza Italia, pulled its support for the government last month after the PD supported the drive to have the media magnate ejected from parliament following the supreme court's decision to uphold a tax-fraud conviction against him. Letta has said his government is now in a stronger position, even though it has a smaller majority in parliament.

The executive survived confidence votes in parliament last week with the support of the New Centre Right (NCD) party, a group of pro-government moderates led by Deputy Premier and Interior Minister Angelino Alfano, who split from Berlusconi loyalists. "The government has been on a roller coaster for eight months but it intends to tackle the coming months with determination and commitment," Letta said. "Despite the difficulties, we want this country to start thinking big again and we'll do it".

Letta has pledged that the government will push through reforms designed to reduce the cost of Italy's political apparatus and make the country easier to govern, including a new election law, reductions to the number of parliamentarians and curtailing the Senate's law-making powers.

He has also promised to move forward with structural reforms deemed necessary to revive an economy battered by a long recession and a decade of sluggish growth.