* Giorgia Meloni says very fluid moment on Italy's centre-right
* Says Berlusconi party has failed to build foundation for future
ROME, Oct 22 (Reuters) - Italy's divided centre-right is paying a heavy price for failing to arrange a smooth succession to Silvio Berlusconi, according to a minister in his last government who broke ranks with the former premier last year to set up a rival conservative party.
Giorgia Meloni, a 36-year-old former youth affairs minister, known for her rapid-fire debating and thick Roman accent, launched the Fratelli d'Italia (Brothers of Italy) party late last year and is one of several lawmakers trying to find space on the right of Italian politics after a revolt within Berlusconi's People of Freedom (PDL) party in September.
"This is obviously a very fluid moment; the situation is being redefined, there's a lot of confusion," Meloni told Reuters. "But obviously the problem for the centre-right - and in a certain sense for the centre-left as well - is that for 20 years everything has revolved around Berlusconi."
Now the billionaire Berlusconi's total control of a party built largely around former executives of his Mediaset television empire and a loyal army of parliamentary footsoldiers, disparagingly dubbed "peones", is under its greatest threat in two decades.
Berlusconi's domination of Italian politics has not just shaped the right. The centre-left has also been drawn into his orbit, struggling to define itself as anything other than an anti-Berlusconi force, as one leader after another has failed to shift the focus away from "Il Cavaliere".
But the revolt last month by PDL Senators was a humiliation for Berlusconi that has changed all that, forcing him to back the government of Prime Minister Enrico Letta in parliament only days after he pledged to bring it down. There had been PDL defections before, but none that challenged his authority so directly or revealed such a fragile grip on the party.
On Monday evening, the divisions within the PDL surfaced again when 24 party senators signed a statement defending Italy's recently unveiled budget from attacks by other members of the conservative party. "The level of degradation in the tone and language of political debate within the PDL is intolerable," the senators wrote in the statement.
Meloni said Berlusconi's way of running his party like a personal political vehicle had sowed the seeds of the revolt. When she left the PDL last year she protested that it had not held primaries to choose a new leader.
"If the top group in the centre-right had had the courage to say there needed to be a method of selecting its leaders we wouldn't be in the situation we're in," she said. "The centre-right has never been able to think past Berlusconi, to construct something that would be capable of surviving Berlusconi."
The PDL has still not decided how a future leader will be selected, nor what role Berlusconi will play if, as expected, he is forced out of parliament and banned from holding public office following his conviction for tax fraud.
Favourites include his 47-year-old daughter Marina, a political novice but an experienced executive in his Fininvest business empire, or Angelino Alfano, the 42-year-old party secretary and deputy prime minister who led the PDL revolt.
Raffaele Fitto, the former governor of the southern Puglia region, is seen as another possibility.
Fratelli d'Italia, whose name is taken from the first words of the Italian national anthem, was formed with lawmakers from the former right-wing National Alliance party that was absorbed into Berlusconi's party before the 2008 election. It now has nine deputies in the lower house of parliament with priorities that include support for small businesses, homeowners and the rights of Italian workers.
"When I joined the People of Freedom, I believed in a broad centre-right party that would be capable of bringing diverse experiences and identities together," said Meloni. "This experience obviously failed."
Meloni's party, which voted against Letta's government in the confidence vote and which remains in opposition, is now seeking to position itself for the expected shake-up by seeking alliances with other conservative politicians, including disgruntled PDL lawmakers and other right-leaning politicians.
The new group has yet to take clear shape but at a brainstorming session among right-wing officials this month, participants included former Economy Minister Giulio Tremonti and former Foreign Minister Giulio Terzi.
Meloni says the goal of her party - and the centre-right in general - is to look past Berlusconi and reconnect with voters who have either turned away from politics or joined the anti-establishment 5-Star Movement.
Deeply opposed to the Brussels-friendly policies pursued by both Prime Minister Enrico Letta and his predecessor Mario Monti, she says the broad coalition of left and right that has run Italy since Berlusconi was forced from power in 2011 has been a disaster.
"You can't have a government where no one agrees on anything and everyone hates each other and imagine that it's going to work for the good of the country. It's a house of cards."
(Reporting by James Mackenzie; Editing by Alessandra Galloni and Will Waterman)