* Committee recommendation paves way for full Senate vote
* Vote follows split in former prime minister's party
* Berlusconi, followers remain defiant
By Massimiliano Di Giorgio
ROME, Oct 4 (Reuters) - An Italian Senate committee said on Friday former Prime Minister Silvio Berlusconi should be expelled from parliament due to his conviction for tax fraud, paving the way for a final decision this month that could seal his political fate.
The recommendation to kick out the man who has dominated Italian politics for the past two decades was taken by a cross-party committee of 23 Senators dominated by the centre-right leader's political opponents.
Though not the final word, the committee's decision marks a professional and personal defeat for the media tycoon who became one of Europe's best-known and most colourful politicians. It comes on the heels of a humbling coup against Berlusconi from part of his own People of Freedom party (PDL).
The recommendation, passed by 15 votes to 8, must be ratified later this month by a vote of the full Senate, where Berlusconi's supporters are also in a minority, before he loses the Senate seat he has held since February's election.
"This shameful decision is not the result of a correct application of the law but of a desire to eliminate by judicial means a political opponent it was not possible to defeat democratically through the ballot box," Berlusconi, who did not attend the hearing, said after the vote.
His allies in parliament were equally defiant.
"The axemen shouldn't delude themselves, what is rolling on the floor is the title of senator, not the head of the man and the politician Berlusconi, who remains the leader and point of reference for half of the Italians," said PDL lower house speaker Renato Brunetta.
The Senate proceedings cap a disastrous week for the 77-year-old billionaire, who was forced into a humiliating climb-down on Wednesday by a party revolt which made him back centre-left Prime Minister Enrico Letta in parliament.
After pulling his ministers from the coalition government at the weekend and calling for new elections, Berlusconi had to reverse his decision to bring down the government and, instead, back Letta in a confidence vote.
The revolt by dissenters in his own party left Berlusconi's PDL divided into two blocs, with 42-year-old party secretary Angelino Alfano heading a group of moderates while a hard core of loyalists remain with Berlusconi, although a formal split has not yet been confirmed.
Even if Berlusconi is expelled from the Senate as expected, he could still lead the centre right, or the part of it that remains loyal to him, from outside parliament.
However, his position would be weaker and he would be robbed of the protection from arrest which parliamentarians enjoy, which could be important as he faces many other legal cases.
Financial markets have reacted positively to the survival of Letta's government, with yields on Italian 10-year bonds falling to 4.3 percent, the same level as before the crisis erupted.
Berlusconi's political future has been under threat since early August, when Italy's top court rejected a final appeal and found him guilty of a massive tax fraud scheme at his Mediaset television empire.
It sentenced him to four years in prison, commuted to one year under house arrest or in community service, making him ineligible for parliament under a law passed last year.
Berlusconi loyalists insist this law should not apply in his case because the offences occurred before it was passed.