ROME (Reuters) - Italian Prime Minister Mario Monti said on Thursday he had enough support for planned labor reforms despite a wave of criticism from unions and employers against proposals aimed at making it easier for companies to fire workers.

The battle over reforms to Italy's rigid system of labor contracts has dominated Monti's agenda this year and provided his first major political battle since he replaced the scandal-plagued Silvio Berlusconi in November.

"I am very confident that the country will continue to understand and the parties which have supported the government will continue to do so," Monti told Reuters in an interview.

Monti watered down his original labor plans on Wednesday, agreeing to give courts the power to order employees to be reinstated when the business reasons used to justify a dismissal were deemed "manifestly inexistent".

CGIL, Italy's biggest union, which has fiercely opposed what it sees as a major attack on workers' rights, said the change was welcome but not enough for it to abandon its plans for industrial action.

At the same time, the changes were greeted with fury by Confindustria, the main employers' federation, which said they were "profoundly disappointing" for business.

Monti said he was not surprised by the reaction but said the big battle would be in parliament, where he depends on support of both the centre-left Democratic Party and the centre-right PDL party to be able to govern.

"We believe the place where the national interest is served, is parliament and, with all due respect, not the unions or employers," he said.

On Wednesday, Monti said he had cross-party support for the revised proposals following a meeting with party leaders but the agreement appeared to be fraying a day later as the PDL demanded changes and accused Monti of giving in to the left.

He said he would not rule out the use of a confidence vote, which would force parties to back him or see him resign, to get the proposals through.

"A confidence vote may be helpful, it would not be an exceptional instrument, we have used it several times in the past four and a half months," he said.

PROTECTION

The hostile reaction to the measures, which have dented Monti's previously impregnable approval ratings with the public, underlines the challenge facing the government, although Monti said he did not expect any major upheavals.

"Do we expect social unrest? I hope not, I believe not," he said. "What has been introduced in terms of reform by this government has met with higher than expected acceptance by the public."

The job protection measures are part of a package aimed at overhauling a system that offers broad protection to workers on permanent contracts but leaves growing numbers of mainly younger workers in insecure, short-term jobs.

Current rules make it very difficult for companies with more than 15 workers to sack individual employees for reasons other than gross misconduct.

The government says employers and investors are held back from taking on new workers by the fear that they will not be able to cut staff numbers if business conditions deteriorate.

"We must concentrate on measures to make Italy grow more and faster and although the short term impact of these structural reforms may be nil or negative, this is really removing the structural impediments to growth," Monti said.

Employer groups and centre-right politicians have been irritated by concessions given to unions and say more needs to be done to protect companies from extra costs.

But Monti said their fears were overdone: "Companies should not really worry because it's only in very extreme cases that there will be the risk that they are permanently under today, namely of reinstatement."

(Additional reporting by Laura Viggiano; Writing by James Mackenzie; Editing by Maria golovnina)