By Paolo Biondi
ROME (Reuters) - Silvio Berlusconi's center-right party declared on Tuesday it would vote against Italy's 2014 budget, confirming its break with the ruling coalition a day before the Senate moves to expel the media tycoon over a tax fraud conviction.
Prime Minister Enrico Letta's government has called a confidence vote to speed up the budget which parliament must pass before the end of the year and is expected to have the numbers to win even without Berlusconi's support.
But the confirmation that the biggest party on the center-right was withdrawing its support from the unwieldy coalition of left and right formed after last February's deadlocked election underlined the political instability facing the euro zone's third biggest economy.
"From today we are in opposition and the grand coalition is over," said Renato Brunetta, lower house leader of Berlusconi's center-right party, now rebranded under its original name Forza Italia.
Around 60 center-right lawmakers have split away from Forza Italia and pledged their support for the government, meaning that Letta should easily have the majority he needs to survive and keep approval of the budget on track.
A further showdown awaits on Wednesday when the Senate is due to vote to strip Berlusconi of his seat in the upper house after he was convicted in August of being at the center of a vast tax fraud conspiracy at his Mediaset television empire.
With both the center-left Democratic Party and the anti-establishment 5-Star Movement voting against Berlusconi, an expulsion appears certain with a protracted bout of parliamentary guerrilla warfare likely to follow.
Leading member of Forza Italia Paolo Romani described the Wednesday vote as "the funeral of democracy", but he said his party would still be able to set its stamp on parliament even in opposition.
"Anyone who thinks Forza Italia is no longer relevant for the coalition is making a big mistake," he said.
Speaking at a joint news conference with Russian President Vladimir Putin in the northern eastern city of Trieste, Letta said that Italy, still stuck in its worst postwar recession, desperately needed stability to reform its stagnant economy.
"For us to get back to growth, Italy needs to avoid chaos and that's what I've been working for the past seven months and it's what I'm working for now," Letta said.
Confidence votes, which limit the scope for time-consuming amendments, are regularly called to speed legislation and Tuesday's Senate vote on the first reading of the budget will not be final approval.
The vote is expected to take place around midnight but officials said it could be pushed back until Wednesday morning if there were further delays.
With the European Central Bank guaranteeing market stability, Italy has not seen the kind of turbulence it went through at the height of the euro zone debt crisis in 2011, but the prospect of disruption has caused alarm outside Italy.
European Commission President Jose Manuel Barroso, a leading member of the center-right European People's Party, called Berlusconi in a vain last-minute bid to try to prevent a break with Letta's government, Forza Italia lawmakers said.
The government has packed a series of measures into a so-called maxi-amendment on which it has called the confidence vote but officials were still working on details of the package with only hours to go before the vote.
The budget, the object of intense negotiations between coalition partners, includes some tax cuts on labor costs but the European Commission has warned it might not achieve debt reduction targets.
If ejected from parliament, Berlusconi will lose immunity from arrest and from being wiretapped by investigators as he faces at least two other criminal probes and appeals a conviction for paying for sex with an underage prostitute.
However, his lawyers dismissed any suggestion that he risked arrest after his expulsion. "We believe this a completely unrealistic hypothesis," Franco Coppi, one of his legal team, told reporters in Rome.
(Additional reporting by Catherine Hornby; writing by Steve Scherer and James Mackenzie; editing by Ralph Boulton)