Italy's lower house approves Renzi's schools reform

* Trade unions, teachers, students object to many details

* Rebels in PM's factious party refuse to vote in Chamber

By Gavin Jones

ROME, May 20 (Reuters) - Italy's Chamber of Deputies on Wednesday approved an education reform that Prime Minister Matteo Renzi says is vital to fix the country's sub-standard schools but is fiercely opposed by trade unions and many teachers.

Renzi's "Good Schools" reform passed by 316 votes to 137 in the 630-seat lower house. Most of those who oppose the package did not take part in the vote, while hundreds of teachers protested outside parliament calling for the reform to be scrapped.

Among the deputies boycotting the vote were some 40 members of Renzi's Democratic Party (PD), increasingly divided among a majority of Renzi loyalists and rebels who say he is dragging the traditionally centre-left party too far to the right.

"A schools reform that isn't supported by the great majority of teachers cannot work," said Stefano Fassina, a prominent PD dissident.

The legislation, which is a central part of Renzi's agenda aimed at reviving a chronically weak economy, will now move on to the upper house, the Senate, where his coalition government has a much smaller majority.

The Bank of Italy and international bodies give Italy's school system a large share of the blame for more than a decade of labour productivity stagnation.

Italy has fewer graduates as a proportion of the population than Germany, Britain, France or Spain and its students come near the bottom of international league tables measuring basic numeracy and literacy skills.

The reform plan gives school directors powers to directly hire and promote teachers, which Renzi says will improve standards by rewarding merit. Teachers unions say increasing the powers of directors will only increase clientelism.

They also oppose other planks of the reform, such as tax breaks for private schools, and say it fails to address the real problem of chronic under-funding for the state system. Italy spends less on education as a proportion of national output than all its main euro zone peers.

After a nationwide teachers' and students' strike on May 5 and in the face of political opposition, Renzi stripped out one contentious measure which would have allowed parents to directly fund their childrens' schools in their tax returns.

"For me it's important that the reform goes ahead and the teachers are involved," he said on Wednesday, but the unions vowed more protests.

"Today's vote doesn't end things, the battle will go on," said Susanna Camusso, leader of the left-wing CGIL union. (Reporting by Gavin Jones; Editing by Tom Heneghan)