UPDATE 2-Monti says will lead centrists in Italian vote
* Monti confirms joining race for Feb. 24-25 election
* Says wants to transcend traditional boundaries
* Berlusconi party says election run helps left
By James Mackenzie and Steve Scherer
ROME, Dec 28 (Reuters) - Outgoing Italian Prime Minister Mario Monti said on Friday he would lead a centrist alliance in an election in February, ending weeks of speculation over his political future and confirming his bid for a second term.
The announcement clears up some of the uncertainty hanging over election and puts Monti in a three-way contest for power with the centre-left Democratic Party (PD), which is leading in the polls, and Silvio Berlusconi's People of Freedom (PDL) party.
The former European Commissioner, appointed at the head of a technocrat government last year to save Italy from financial crisis after Berlusconi stepped down as prime minister, said he was willing to accept "being named as leader of the coalition".
Monti said the alliance would try to go beyond traditional political boundaries and unite a broad coalition of political factions and groups from civil society around a reform agenda aimed at repairing the deep problems in the Italian economy.
"The traditional left-right split has historic and symbolic value" for the country, but "it does not highlight the real alliance that Italy needs - one that focuses on Europe and reforms", Monti said after a meeting with centrist politicians.
Monti, a favourite with international investors, the Catholic church and the business establishment, has been widely credited with restoring Italy's credibility after the scandal-plagued Berlusconi years.
However ordinary Italians have become increasingly tired of the mix of tax hikes and spending cuts he has imposed to repair Italy's battered public finances and an opinion poll suggested that 61 percent did not want him to run in the election.
Monti, whose status as senator for life means he does not have to stand for a seat, said the grouping could win a "significant result" in the election on Feb. 24-25, but there have also been fears it could lead to a less stable parliament.
Opinion polls suggest the PD, under Pier Luigi Bersani, will win a comfortable lower house majority but may have to strike a deal with centrist forces in the Senate, where the centre left has struggled to gain control in past elections.
The PD, which has pledged to maintain Monti's broad reform course while putting more emphasis on growth and jobs, has been sceptical about his candidacy, but has so far maintained a tone of polite respect for the 69-year-old economics professor.
By contrast, Berlusconi has launched a media blitz against Monti with a series of angry attacks against his "Germano-centric" austerity policies, which he blames for deepening a severe recession and creating record unemployment.
Berlusconi has vowed to scrap a hated property tax, introduced to help cut the deficit and one of the most notable symbols of Monti's year in office, and says he would stand up to German Chancellor Angela Merkel.
Angelino Alfano, secretary of his centre-right PDL, accused Monti of trying to organise a hidden accord with the left.
The centre-left PD, which unveiled Italy's chief anti-mafia prosecutor Piero Grasso as its latest candidate on Thursday, has indicated it would be willing to consider an alliance with Monti's centrists.
However, it has also said that if it was the largest party in parliament, as polls suggest it will be, it would insist on naming the prime minister.
Monti said that there would be a single list of candidates, possibly called "Monti's agenda for Italy", in the upper house, while he would probably be the prime minister candidate for a coalition of established parties in the lower house.
He said technical aspects of the electoral law were the reason for the slightly different groupings in the two houses. However he also appeared to be giving way to the oldest and largest centrist party, the UDC, which is close to the church and which had opposed merging with other smaller parties.