Italy divided by plan to grant more powers to its regions

ROME (Reuters) - The Italian parliament approved a contested reform granting regions more powers after a stormy all-night sitting, an overhaul critics say will worsen the historic divide between the country's wealthy north and poorer south.

Championed by the League party in the coalition government, the lower house passed the reform early on Wednesday after a session which ended with opposition deputies singing the national anthem and waving the Italian flag.

League leader and deputy prime minister Matteo Salvini hailed "a victory for all Italians," saying on X that the reform would help Italy become a more modern country with fewer wasted resources.

League deputies brandished the yellow and red flag of the historic Venetian Republic, with its winged lion, as the reform was approved with 172 votes in favour to 99 against.

With feelings running high on both sides, former Prime Minister Matteo Renzi joined calls to gather the 500,000 signatures needed for a referendum on the issue.

"It's a measure that does not help the north and harms the south. It's institutional madness," Renzi, a member of the upper house (Senate), said on X.

Prime Minister Giorgia Meloni's right-wing coalition pushed through the reform as part of a wider shake-up of the Italian state, including plans for a directly-elected head of government.

"This is a step forward towards building a stronger and fairer Italy, to overcome the differences that there are today between the various parts of the country," Meloni said.

The new law enables regions to claim broader powers on key public services such as health and education, and to have a bigger say on how taxes are spent. The League hopes the law will revive its fortunes in its traditional northern strongholds.

Right-leaning Lombardy and Veneto, as well as left-leaning Emilia-Romagna, are among the northern regions expected to seek more autonomy. The extent of powers devolved to them will depend on negotiations with the central government.

Elly Schlein, leader of the centre-left opposition Democratic Party, attacked the measures as divisive and bound to increase inequality.

"This vote sanctions the existence of first and second class citizens," Schlein told parliament.

Italy's north-south divide is exemplified by the economic gap between the southern Calabria region, where gross domestic product per capita is about half of the EU average, and the northern Bolzano province, where GDP per capita stands at around 150% of the EU average.

(Reporting by Alvise Armellini and Gavin Jones; Writing by Keith Weir; Editing by Christina Fincher and Crispian Balmer)