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UPDATE 2-Berlusconi seeks confidence vote to save coalition
* Berlusconi to address parliament, seek confidence
* Italy president says Berlusconi must give "credible response"
* President says worried about "acute tensions and uncertainty"
By Philip Pullella
ROME, Oct 12 (Reuters) - President Giorgio Napolitano expressed deep concern about the viability of Italy's government on Wednesday as Prime Minister Silvio Berlusconi scrambled to quell an internal rebellion by calling a confidence vote.
Napolitano talked of "acute tensions and uncertainties" in the centre-right coalition and commentators said there was a growing possibility of elections next spring, a year ahead of schedule.
In an unusually blunt statement, the president asked if the Berlusconi government still had the necessary unity to pass urgent measures for the country and demanded that Berlusconi offer "a credible response" to the nation.
Berlusconi will address parliament on Thursday and ask for a vote of confidence, Fabrizio Cicchitto, leader of centre-right parliamentarians in the lower house, said.
The vote will likely be held on Friday after a parliamentary debate. Berlusconi would have to resign if he loses.
Napolitano's statement was a clear reference to repeatedly delayed measures to boost Italy's chronically slow economic growth, and continuing squabbles over an austerity package -- passed under pressure from the European Central Bank -- to balance the budget by 2013.
Berlusconi decided to address parliament after the coalition -- wracked by internal dissent -- suffered a major embarrassment when it failed to pass a budget provision on Tuesday.
Berlusconi has insisted that failure to approve the balance sheet for last year's state spending by one vote was just an "accident" caused by the absence of several coalition members from the chamber.
But political analysts said some of those who did not vote, including Economy Minister Giulio Tremonti, who is constantly at loggerheads with Berlusconi, stayed away intentionally to send a message about the deep malaise within the coalition.
"When the prime minister and the finance minister are not on the same page, then there is little point in the government soldiering on," said Nicholas Spiro of Spiro Sovereign Strategy in London.
Analysts said the government was unlikely to fall immediately but its ability to take action, at a time when the economy is under huge pressure from the markets, would be constantly hampered by internal disputes -- the reason for Napolitano's concern.
Yields on Italian government bonds are dangerously high considering its massive public debt, because of investors' lack of confidence that Berlusconi's government can take decisive action.
"Political dysfunctionality in Ialy is now a major source of stress in the eurozone," Spiro said.
"We could have a government crisis at any time and even head towards early elections," said Massimo Franco, political commentator for the respected Corriere della Sera newspaper.
After the government failed to pass the measure, the opposition called for Berlusconi to resign, saying the loss meant he no longer had a viable working majority.
Lower house speaker Gianfranco Fini, who broke with Berlusconi last year, said the loss of the vote was unprecedented because the government is constitutionally obliged to approve what is considered a routine measure. "These are very turbulent hours on the political scene," Fini said.
Apart from Tremonti, several other senior coalition members were absent, including Berlusconi's key ally, Northern League party leader Umberto Bossi.
So far, Berlusconi's majority in parliament has held up in repeated confidence votes but there has been mounting press speculation of a revolt within his PDL party.
The 75-year-old prime minister is facing internal challenges from a number of centre-right ministers who are unhappy with the way he is running the coalition and the damage his personal and judicial woes have done to Italy's reputation.
After Tuesday's loss, the opposition called on Berlusconi to face the fact that he no longer had a workable majority and step down.
"This government has no programme left, it has no coalition, it has no objectives except to guarantee itself power," said Massimo Donadi, head of parliamentarians in the opposition Italy of Values party.
Berlusconi has come under mounting attacks as the financial crisis and growing divisions in the coalition fuel speculation that his government will collapse before the end of its term in 2013.
Ratings agency Fitch last week cut Italy's credit rating by one notch with a negative outlook, following a downgrade by Moody's and Standard and Poor's, underlining market concern over the stability of its public finances and its chronically weak growth.
A 60-billion-euro austerity package to balance the budget by 2013 was passed last month only after weeks of hesitation and delay, while the timetable for a decree to pass economic reforms and approve the sale of state assets has slipped to Oct. 20.
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