Italians see instability after election, lose faith in Monti
* Monti loses popularity after entering race
* Only 14 percent of Italians expect stable government
* Grillo's populists lose ground under Berlusconi/Monti assault
By Barry Moody
ROME, Jan 11 (Reuters) - Only one in seven Italians believe a stable government will emerge from elections next month and outgoing Prime Minister Mario Monti's popularity has dropped to a new low since his entry into the race, an opinion poll said on Friday.
Renewed instability and legislative paralysis after more than a year of technocratic government under Monti could make Italy once again the biggest concern in the euro zone.
The poll by the SWG company, six weeks before the Feb. 24-25 election, showed the centre-left still far ahead, about 10 points in front of Silvio Berlusconi's centre-right.
It also showed that established parties had succeeded both in reducing the number of undecided voters or those who plan to abstain and in eroding support for the populist 5-Star Movement of comedian Beppe Grillo.
The balance of forces is broadly in line with other opinion polls although SWG has the centre-left on nearly 35 percent, while other pollsters put them close to 40.
Monti's entry into the race just after Christmas at the head of a centrist grouping and Berlusconi's frenetic campaigning in a barrage of television appearances appear to be behind the movement of voters back to mainstream parties.
The poll showed undecided voters and those planning to abstain at 33.5 percent after nearly 50 percent on Dec. 21.
With a centre-left victory seen as almost certain, Monti and Berlusconi are attacking each other most aggressively, intent on winning the balance of power in the Senate where the result is still highly uncertain.
Grillo has also lost ground because of defections from his anti-establishment movement by former supporters who say he is a dictatorial control freak.
He alarmed established politicians late last year by reaching ratings of around 20 percent, ahead of Berlusconi's PDL party. But his movement fell to just under 16 percent in the poll and 13.2 percent in an Ispo survey earlier this week.
After a long silence, Grillo held an impromptu news conference outside the Interior Ministry on Friday, indulging in the kind of anti-politician rant for which he is famous.
"When we enter parliament they will be dead. We will open it up like a tin of tuna. When you see what is inside it will be transparent. When you put a spotlight on a thief he stops robbing people," Grillo told a scrum of reporters.
SWG said Monti's ratings had dropped since he cast off his technocrat clothes and entered the race at the head of a centrist coalition committed to continuing the fiscal rigour that has made him the darling of investors.
The poll showed his approval rating at 30 percent, compared to 38 percent in December and 71 percent when he took over from the scandal-plagued Berlusconi in November 2011 as Italy slid towards a Greek-style crisis.
Monti restored Italy's international credentials and cut its borrowing costs in half during his term. But his tax hikes, especially a hated housing levy, have made him highly unpopular with many ordinary Italians.
The SWG poll showed voters to be deeply gloomy about the future with 61 percent expecting instability after the poll and only 14 percent predicting a stable government.
This is despite a leading analyst's prediction this week that either a self-sufficient centre-left government or an alliance with Monti will emerge from the vote, making it unlikely Berlusconi will destabilise the new administration.
Relations are currently tense between Monti and centre-left leader Pier Luigi Bersani, who accuses the outgoing premier of helping Berlusconi by entering the race and possibly pulling votes away from the left.
Monti in turn accuses Bersani of planning to push the country leftwards and being too influenced by conservative trade unions opposed to reforms.
Berlusconi, a billionaire media magnate and consummate television performer, has boosted the centre-right's fortunes since he joined the race and forged an new alliance this week with the federalist Northern League.
But few believe he can win the election and his support seems to have reached a plateau at around 25 percent.
Intent on garnering as much exposure as possible, Berlusconi on Thursday entered what media called the lion's den, appearing on a three-hour television programme run by a journalist famous for criticising him.
The 76-year-old media magnate weathered a storm of criticism comparatively calmly, deflecting difficult questions about his record and the "bunga bunga" sex parties that have led to his trial on charges of having sex with an underage prostitute.
Many punters were said to have lost money after taking 4-1 odds that Berlusconi would walk off the show.
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