UPDATE 4-Berlusconi vows to stay in politics as ban approaches
* No threat to torpedo government
* Berlusconi rails against judges as expected
* Launches renewed party
By Barry Moody
ROME, Sept 18 (Reuters) - Silvio Berlusconi defiantly vowed to stay at the centre of Italian politics on Wednesday despite his expected expulsion from parliament over a fraud conviction, and accused leftist judges of plotting against him to pervert democracy.
In a long-awaited television address shortly before a Senate committee took a first step towards expelling him, the media magnate made no mention of his previous threats to bring down the left-right coalition government of Prime Minister Enrico Letta because of the conviction.
"I will always be with you, at your side, expelled from parliament or not. It is not the parliamentary seat that makes a leader," the 76-year-old billionaire said. He called for centre-right voters to rally behind the relaunched Forza Italia party, with which he first stormed into politics in 1994.
The supreme court last month confirmed a four-year jail term, commuted to one year, for a giant fraud at his Mediaset television empire. Berlusconi is expected to go into house arrest or do community service instead of going to jail.
On Wednesday evening, fellow senators voted down a move by his party colleagues to try and prevent his looming ejection from the upper house of parliament - paving the way for what is expected to be his formal expulsion by the end of next month.
Berlusconi seemed to be resigned to being forced out parliament but said he would not give up his leadership of the centre right, calling for freedom-loving Italians to "wake up ... rebel, become indignant, react and make yourself heard".
He said he was "absolutely innocent" of tax fraud, and the judiciary had "transformed itself into a rival state power, capable of influencing the executive".
"They want to get rid of me by judicial means because they have been unable to do so with democracy," said Berlusconi, who was also ordered by the supreme court on Tuesday to pay almost half a million euros to a business rival over a disputed takeover battle.
Berlusconi wants to seize the initiative despite his conviction by replacing his current People of Freedom (PDL) party with Forza Italia to revitalise centre-right voters and appeal to young people.
He promised "less state power, less public spending, less taxes. With the left in power it would be the opposite."
Berlusconi did not mention the government, but PDL secretary Angelino Alfano has said his leader would make a final decision on its survival only after the vote in the Senate, where Letta's Democratic Party (PD) says it will support his expulsion.
A Senate committee dominated by his adversaries rejected a technical motion by the PDL to confirm Berlusconi's membership of the chamber. That prompted a walkout by centre-right members.
"This was a political vote to guillotine Berlusconi," PDL senator Elisabetta Casellatti said outside the committee room.
The committee is expected to vote early next month on a motion from the left to strip the former premier of his seat. It would then go to a vote on the floor of the house by late October. Left-wing opponents said he was already on his way out.
"After tonight's vote, Senator Berlusconi's status as an elected member is officially under challenge," said Dario Stefano of the Left Ecology Freedom party, who is due to present the motion calling for Berlusconi's expulsion.
Political sources say the 76-year-old appears to have listened for now to PDL doves, business allies and members of his family who believe a crisis would badly rebound on the centre-right and would also damage his media empire financially.
Italy is mired in its worst postwar recession and Berlusconi risks taking the blame for irresponsibly worsening the crisis if he provokes more instability over his legal problems. Opinion polls show a large majority of Italians against snap elections.
The depth of Letta's problems was underlined on Wednesday when a government source said the finance ministry was considering delaying the target of a balanced structural budget from 2013 to 2014.
The euro zone's third largest economy is lagging behind many of its peers in climbing out of recession, partly because Letta's government is too divided to pass vital reforms.
Any votes in the Senate could still trigger a political crisis although Berlusconi may be waiting until November, when he can paint it as a battle against moves by the centre-left to raise taxes as part of next year's budget discussions.
Berlusconi is also thought to be trying to find a way to blame the fractious PD, which is in turmoil ahead of its party congress in the autumn, when charismatic Florence mayor Matteo Renzi is expected to be elected party leader.
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