UPDATE 4-Italy's new PM vows radical change, flanked by party bosses

* PM seen winning confidence in both houses

* PM Conte not a member of either coalition party

* PM embraces "populist, anti-system" moniker

* Bonds rise as PM holds line on plans to hike spending

* (Adds comments by lawmakers)

ROME, June 5 (Reuters) - Italy's new prime minister promised on Tuesday to bring radical change to the country, including more generous welfare and a crackdown on immigration, as the two party bosses who hold the keys to his anti-establishment government nodded their approval.

Prime Minister Giuseppe Conte addressed the Senate, flanked by the leaders of two formerly fringe parties that had shoved aside mainstream groups at an election in March to form a coalition with little-known law expert Conte as its head.

"The truth is that we have created a radical change and we're proud of it," Conte told the Senate, where he is expected to win a confidence vote later in the day.

The coalition, made up of the 5-Star Movement and the League, has about a 10-vote majority in the Senate and a wider margin in the lower house, which is due to vote on Wednesday, making the outcome of the votes a foregone conclusion.

Conte, 53, spoke as 5-Star leader Luigi di Maio and League chief Matteo Salvini sat beside him, nodding their approval as the urbane law professor ticked off all the main elements of a policy agenda the party leaders had finalised days before.

Di Maio is labour and industry minister in Conte's government, and Salvini is interior minister, raising doubt about whether the prime minister, a political novice, can put his own stamp on the government's agenda.

In his 72-minute speech, Conte said priorities would be to address social hardship through the introduction of an universal income -- a 5-Star election promise -- and to stem an influx of irregular immigrants, a key policy of the League.

"The political forces that make up this government have been accused of being populist and anti-system...," Conte said.

"If populism means the ruling class listens to the needs of the people ... (and) if anti-system means to aim to introduce a new system, which removes old privileges and encrusted power, well these political forces deserve both these epithets."


Conte is not affiliated to any party, though he is close to 5-Star, which presented him as a potential minister before the March 4 election. Di Maio and Salvini vetoed each other as prime minister and picked him as a compromise figure.

Renato Brunetta, a top lawmaker in Silvio Berlusconi's Forza Italia party, mocked Conte's dependence on the parties that picked him, calling him a "remote controlled" premier. But 5-Star Senator Michele Giarusso defended the choice of "the government a lot of us were waiting for".

In a sign of the risk that the party leaders will upstage Conte, Salvini spoke with Hungarian Prime Minister Viktor Orban on Monday after the government was formed -- a phonecall that, many Italian newspapers noted, would normally have been carried out by a new prime minister, not one of his cabinet members.

Conte touched on one of the most sensitive issues for financial markets, saying fiscal rules governing the euro zone should be "aimed at helping citizens" and that Italy would negotiate changes to European Union governance.

Italy's government bonds sold off on Conte's remarks, which confirmed much of the coalition's budget-busting agenda. Italy's 10-year government borrowing costs rose 18 basis points to 2.74 percent and 2-year yields were up 17 bps at 0.99 percent.

"The speech shows there's no signs that any of their proposals will be watered down," said Antoine Bouvet, an interest-rates strategist with Japanese bank Mizuho.

However, Conte made no reference to one of the most costly of the coalition's pledges: abolishing a 2011 pension reform that raised the retirement age.

In the debate after the speech, ex-premier Mario Monti said Italy risks being put under supervision of the European Central Bank, European Commission and International Monetary Fund unless the government carefully manages public accounts.


Italy already has the biggest debt burden of major euro zone nations at about 130 percent of economic output. Economists estimate the coalition's policy agenda would add tens of billions of euros to annual spending.

"We want to reduce the public debt, but we want to do it by increasing our wealth, not with austerity that, in recent years, has helped to make it grow," Conte said. Debt was "fully sustainable today", and key to reducing it was economic growth.

He also referred to the coalition's promise to introduce a flat income tax, but he gave no details nor a timetable for implementing policies -- except to say that the government had a medium-term to long-term vision.

Conte stressed that "Europe is our home" and, despite the coalition's plan to improve Russian ties, restated commitments to both NATO and Italy's alliance with the United States.

On immigration, a major election issue after an influx hundreds of thousands of mostly African asylum seekers, Conte said the government would end "the immigration business".

"We are not and will never be racists. We want procedures that determine refugee status to be certain and speedy, in order to effectively guarantee their (refugee) rights," he said.

League leader Matteo Salvini has pledged Italy will no longer be "Europe's refugee camp".

Once the parliamentary votes are over, Conte will leave for his first international summit, a G7 meeting in Canada that starts on Friday.

(Additional reporting by Gavin Jones, Crispian Balmer, Philip Pullella, Giuseppe Fonte, Antonio Denti, and Massimiliano Di Giorgio in Rome Editing by Mark Bendeich and Peter Graff)