* Confindustria sees risk to social cohesion as crisis bites
* Italian economy contracts by more than 9 percent since 2007
* Weak improvement seen next year
By Antonella Cinelli
ROME, Dec 19 (Reuters) - Italy's main business lobby group warned on Thursday that the risk of social breakdown was growing, despite signs that Italy's two-year recession was coming to an end.
Confindustria, which represents almost 150,000 companies, said it expected gross domestic product to fall 1.8 percent this year rather than 1.6 percent, but forecast a small recovery next year.
"The major risk is a breakdown in social cohesion, with an increase in protest movements channelled by groups urging disobedience and the subversion of institutions," the group's economic forecasting arm said.
It said it broadly expected growth of 0.7 percent in 2014 and 1.2 percent in 2015, though in a less likely, unfavourable scenario, growth might only reach 0.4 percent next year and zero in 2015. It warned that the impact of the recession would be long-lasting.
Noting that the economy had contracted by 9.1 percent overall and by 11.5 percent per head of population since 2007, it said Italy was facing a situation comparable to the damage inflicted by a war.
"The use of the expression 'recovery' to describe the increase in productive activity and internal demand expected in the next two years is in many ways inappropriate," the report said, adding that any improvement appeared "derisory" in comparison with the scale of the contraction. "It would be much better to talk about the start of a new era of reconstruction."
After eight consecutive quarters of contraction, Italy's economy was flat in the third quarter, while industrial production data has improved, prompting Economy Minister Fabrizio Saccomanni to declare the recession over.
However, unemployment remains at record levels, with more than 40 percent of young people out of work. Thousands of companies have closed, incomes have fallen and households have been forced to eat into their savings.
The comments underline growing concern at the threat of social tension in the eurozone's third largest economy, which has seen sporadic anti-government demonstrations over the past two weeks.
Prime Minister Enrico Letta has warned that European Parliament elections in May could produce the largest vote against the European Union ever seen in Italy, fuelled by popular anger at the sacrifices imposed on ordinary citizens in the crisis.
Financial markets have calmed since the height of the euro zone crisis, when Italy was on the brink of defaulting on its huge public debt, but the austerity measures adopted to control public finances have caused widespread resentment.
Confindustria forecast that Italy's deficit would come in at 3 percent of GDP in 2013, just in line with European Union borrowing limits, falling to 2.7 percent in 2014 and 2.4 percent in 2015.
It said public debt would reach 132.6 percent of GDP this year, compared with a previous estimate of 131.7 percent. It said it would rise further to 133.7 percent in 2014 before easing to 132 percent in 2015.