UPDATE 1-Italy's Draghi vows no tax hikes, hailed as saviour by big business

(Recasts, combines comments from business lobby)

By Giuseppe Fonte and Crispian Balmer

ROME, Sept 23 (Reuters) - Italian Prime Minister Mario Draghi promised on Thursday not to hike taxes and said his government would help soften the blow of surging power costs, winning himself a standing ovation from Italy's business elite.

The former European central bank chief told the powerful employers' lobby Confindustria that he would like to forge a pact with big business to help Italy rebuild from the economic chaos triggered by the COVID-19 pandemic.

Business leaders in turn asked for Draghi to stay in power for as long as possible, urging him to shun the temptation of becoming head of state when the position becomes free next year, and instead keep on running the country.

"We hope (Draghi) will continue in this current role for a long time," said the head of Confindustria, Carlo Bonomi, hailing Draghi as a "man of necessity".

Relations between industrialists and governments have often been frosty in Italy, with employers complaining for years about a hefty corporate tax burden, suffocating red tape and political interference.

Draghi, who took charge of a unity government in February, said he hoped to resolve Italy's problems with a multi-billion-euro recovery plan partly funded by the European Union.

"The government has no intention of increasing taxes. This is a time when money needs to be given, not taken," Draghi said.

He said the economy would grow around 6% this year against a previous forecast of 4.5%, but said this was partly a simple rebound from the record recession in 2020 and warned that the real challenge would be to see sustained growth in future years.

He said rising commodity prices posed a potential inflation risk and pledged to spend over 3 billion euros ($3.5 billion) in the coming months to help limit an expected surge in retail power prices, predicting that without intervention, electricity prices could jump 40% in the next quarter and gas prices 30%.

He also promised help to overcome a shortage of semiconductors which is hurting an array of sectors, saying the government would make "major investments" in the microelectronics industry and encourage home-grown research.

Bonomi urged the array of political parties who currently support Draghi not to let their own self-interests get in the way and instead enact wide-ranging reforms that economists say are badly needed in the eurozone's third largest economy.

"We say, no more delays, no more games, no more vetoes."

He also said the government needed to do more to help firms overcome the cost of ecological transition.

"The national recovery plan provides only 6% of the investment needed for the transition. Almost 94% has to be covered by companies," Bonomi said, adding that the transition could cost Italy more than 650 billion euros in the next decade.

Draghi replied that the government would look to help by developing renewable energy sources, such as solar panels, but said there would be no going back.

"The ecological transition is not a choice but a necessity." (Additional reporting by Angelo Amante and Giulia Segreti; Editing by Chizu Nomiyama)