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Italy's Berlusconi says election fight pits his group against 5-Star
















By Isla Binnie

ROME (Reuters) - Italy's election in March pits the center-right group against the anti-establishment 5-Star Movement because the ruling left-wing party lags in polls under the country's third prime minister since the last election, center-right leader Silvio Berlusconi said on Friday.

Polls suggest no one will win an outright victory but an alliance around Berlusconi's Forza Italia (Go Italy!) looks set to take the highest number of seats.

On Thursday, the government of Prime Minister Paolo Gentiloni set March 4 as the date for a vote expected to produce a hung parliament, instability and possible market turbulence in the euro zone's third-largest economy.

Parties across the spectrum are pledging to voters that they will change or abolish European Union budget rules, cut taxes and spend more to boost the economy which is slowly picking up steam.

Immigration is also set to be a central issue, with right-wing parties warning of an "invasion". The center-right also wants a parallel currency, while 5-Star says it will call a referendum on euro membership if EU partners refuse to budge on the Fiscal Compact.

Gentiloni's Democratic Party (PD) has been in power since 2013. 5-Star is set to be the best-performing individual party, and the PD looks set to come third.

"The challenge is between moderates like us ... and rebellious, poverty-perpetuating vigilante movements like the followers of (Beppe) Grillo," Berlusconi said in an interview with Corriere della Sera, referring to the stand-up comedian who founded 5-Star.

Berlusconi's main coalition partner is the far-right Northern League, which is allied with France's Marine Le Pen in the European Parliament and is only slightly behind Forza Italia in the polls.

Forza Italia is polling at about 16 percent compared with 13 percent for the League.

Five years after Europe's debt crisis brought down his fourth government, the 81 year-old media mogul burst unexpectedly back on to the political scene last year, although he cannot become prime minister due to a tax fraud conviction.

He locked horns this week with 5-Star leader Luigi Di Maio, 31, whose party's support is stable at around 28 percent, over their respective proposals for income support programs for Italy's growing ranks of poor people.

Di Maio accused Berlusconi of copying 5-Star's "citizens' wage" proposal which would top up the income of 9 million poor Italians, with a "dignity wage" aimed at the 15 million poorest.

Berlusconi hit back in an interview on La 7 television: "If we copied it from anyone, it was from a great liberal economist like Milton Friedman, certainly not the 5-Star."

With all signs pointing to a hung parliament, Berlusconi has not yet given full backing to any one leader to take the center-right bloc into the election, and has even said the current government should stay on as caretaker if there is no winner.

League leader Matteo Salvini said in an interview with Libero newspaper on Friday that he was waiting for "clarity".

"It's not his put-downs that bother me, it's when he talks about another Gentiloni (government) that my hair stands on end," Salvini said.

(Editing by Matthew Mpoke Bigg)