(Recasts lead, adds comments)
* Berlusconi party secretary says he will form rival group
* Moderate breakaway group to support PM Letta's coalition
* Group has votes to keep govt alive until 2015 - senator
By James Mackenzie and Steve Scherer
ROME, Nov 15 (Reuters) - The secretary of Italian centre-right leader Silvio Berlusconi's party said he would form a breakaway group that would back Prime Minister Enrico Letta's fragile coalition in defiance of the media magnate, who faces expulsion from parliament this month.
Angelino Alfano, interior minister and deputy premier, announced the formation of the new group on Friday. The split came on the eve of a meeting at which Berlusconi will rebrand his People of Freedom (PDL) party as Forza Italia, the original name of his political movement.
It follows months of tension between rival factions over whether to keep supporting Letta's left-right government after former prime minister Berlusconi was convicted of tax fraud in August.
Italy, the euro zone's third largest economy, has been stuck in recession for more than two years and the uncertainty is blocking reforms. President Giorgio Napolitano this week described the political climate as "venomous and unstable".
"I'm here making a choice that I never thought I'd have to make - not join Forza Italia," the 43-year-old Alfano told a group of moderates after last-ditch talks with Berlusconi, who set him up as his political heir two years ago.
The tentative name of the new bloc will be the "New Centre-Right", Alfano said. The group will take enough votes with it to keep the government coalition alive until 2015, breakaway Senator Carlo Giovanardi said.
"AGAINST OUR OWN HISTORY"
Raffaele Fitto, a PDL rival and hardline "hawk" loyal to Berlusconi, said Alfano's move "is a very grave act against his own history, against Silvio Berlusconi, our platform and our voters. The real centre-right voters will judge him."
The rift underscores the instability still threatening Italy despite an uneasy truce following Berlusconi's failed attempt to bring down Letta's government last month.
Berlusconi has demanded that PDL ministers quit the government if Letta's centre-left Democratic Party moves to strip him of his seat in parliament in a vote on Nov. 27 that is required by an anti-corruption law passed last year.
The billionaire politician, furious over the conviction which he says was politically motivated, has been further enraged by the rebellion, which has posed the most serious threat to his authority since his entry into politics two decades ago.
In addition to losing his seat in parliament, Berlusconi, his party's only proven vote winner, faces a year in community service and a two-year ban on holding public office ordered by a Milan court. He would be ineligible to run in any election held next year.
With his party thrown into confusion. Saturday's congress will see 850 members gather to hear him speak.
Alfano has insisted that a break with the government now would only play into the hands of the centre-left, which has been boosted in opinion polls by the infighting on the right.
Letta himself has said repeatedly that the humiliating reverse inflicted on Berlusconi when Alfano's rebels forced him to back the government in a confidence vote on Oct. 2 shows he would have the numbers in parliament to survive even if the PDL breaks up.
But in the feverish climate of intrigue and backroom dealmaking in parliament, it is unclear how many centre-right lawmakers are genuinely prepared to break away from Berlusconi, the man who has determined most of their political careers.
"There's a lot of confusion about the numbers and they're all basically unreliable because a lot of people have been signing pledges for both sides," said one centre-right official. (Additional reporting by Paolo Biondi; Editing by Mark Trevelyan)
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