* Berlusconi to address parliament on Wednesday
* Speech to be followed by vote to test support
* No formal confidence vote that could trigger new election
By James Mackenzie
ROME, Sept 28 (Reuters) - Italian Prime Minister Silvio Berlusconi faces a decisive test of his ability to continue in government on Wednesday when he seeks the backing of parliament after months of feuding with his former ally Gianfranco Fini.
The prime minister is due to address the lower house at 0900 GMT, outlining the priorities for the second half of his term, which is due to run until 2013.
The speech will be followed by a debate and a vote in the evening which will gauge whether the government still has a majority after the break with Fini and a group of more than 40 deputies and senators in July.
Wednesday's vote is not expected to be on a full confidence motion that could bring the prime minister down and trigger early elections, but it will be a clear pointer to whether Berlusconi has enough support to finish his term in office.
The future of the government has been in the balance since Berlusconi effectively expelled Fini from the ruling People of Freedom party they conceived together in 2008 as a new force to unite the Italian centre-right.
There are few major policy differences between the two but even by the Byzantine standards of Italian politics, the acrimony between them has been poisonous, fuelled on both sides by accusations of treachery, corruption, lies and smears.
Fini has accused billionaire media entrepreneur Berlusconi of running the government like one of his private companies and he has been a caustic critic of a series of scandals implicating associates of the prime minister.
Berlusconi in turn accuses Fini, the speaker of the lower house of parliament, of betrayal and says he is only motivated by egotism and personal ambition.
KEEP GOING
Despite the bitterness, Fini has said he does not want to bring down Berlusconi and would not vote against a formal confidence motion. However deputies loyal to him could abstain from a vote, underlining the vulnerability of the government.
Exactly how the parliamentary arithmetic will break down is still unclear, with both Fini's and Berlusconi's lieutenants claiming to have won over new recruits from the other side or from the smaller parties.
Opinion polls show that Berlusconi's approval ratings have dropped steadily since he came to power in 2008, but the enfeebled centre-left opposition has done even worse and the prime minister would probably win a new election.
However it is likely he would emerge with a reduced majority and could lose control of the Senate. He has sounded more cautious lately about the idea of seeking early elections than he did at the start of the crisis.
The weeks of mudslinging have prompted despairing calls to order from figures ranging from the head of the main business lobby Confindustria to the Catholic church, who say the crisis has distracted Berlusconi from the task of reform.
Italy has emerged only slowly from its worst postwar recession and faces sluggish growth at best, with the European Commission calling on the government to implement measures to improve its declining competitiveness.
Public debt is running at almost 120 percent of gross domestic product, unemployment has been stubbornly high particularly among young people and workers have seen spending power squeezed hard over the past decade.
But at the same time, Berlusconi and his Economy Minister Giulio Tremonti have put a tight clamp on public spending and kept Italy out of the turmoil that has swept across countries with much higher budget deficits like Greece, Spain or Ireland.