By Angelo Amante and Giuseppe Fonte
ROME (Reuters) - Italian Prime Minister Giuseppe Conte dismissed criticisms of planned reforms to the euro zone bailout fund on Wednesday, saying the proposals, which have been heavily attacked by right-wing opposition parties, posed no threat to Italy.
Critics of the planned changes to the European Stability Mechanism (ESM) say they would make it more likely that Italy will have to restructure its debt, the highest in the euro area as a proportion of national output after Greece's.
"Italy has nothing to fear ... its debt is fully sustainable, as the main international institutions, including the (EU) Commission have said," Conte told parliament ahead of a European Council meeting this week to discuss the reform.
He repeated that Rome would not agree to any restrictions on banks holding sovereign debt.
During his speech to parliament, Conte sharply rejected criticisms by the right-wing League and Brothers of Italy parties, saying they appeared aimed at undermining Italy's membership of the single currency.
"Some of the positions that have emerged during the public debate have unveiled the ill-concealed hope of bringing our country out of the euro zone or even from the European Union," Conte said.
The League and Brothers of Italy have attacked the planned reforms to the ESM, which they say will open the door for a forced restructuring of Italy's public debt that would hit Italian banks and savers who invest in government bonds.
Some members of the anti-establishment 5 Star Movement have made similar criticisms, adding to tensions with their partner in the ruling coalition, the center-left Democratic Party.
Lawmakers from 5 Star and the Democratic Party appeared to have smoothed over their differences on Wednesday, however, agreeing to drop demands for a veto on measures that could make it easier to reach a debt restructuring accord.
In a final resolution, they scrapped calls for a veto on so-called single limb collective action clauses (CACS), that limit the ability of individual investors to delay any restructuring agreement by holding out for better terms.
Under the new system, restructuring would go ahead after a single, aggregate vote by bondholders regarding all affected bonds while the clauses currently in place require an aggregate vote as well as an individual bond-by-bond vote.
Italy has asked to clarify that the new clauses will not rule out the so-called sub-aggregation, allowing separate votes for different groups of bond issuances to protect small investors, a government official told Reuters.