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Forza Italia leader Silvio Berlusconi gestures during EPP European People's Party meeting in Fiuggi, Italy, September 17, 2017. REUTERS/Remo Casilli

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By Crispian Balmer

ROME (Reuters) - Former Prime Minister Silvio Berlusconi, marking a formal return to Italy's political stage, laid out his policy priorities on Sunday for the forthcoming election, portraying himself as a pro-European moderate.

Speaking at a meeting of his Forza Italia (Go Italy) party, Berlusconi said he wanted to lead the group into the national ballot, which is expected by next March, promising hefty tax cuts if the centre-right regained power.

Subsumed by sex scandals and legal woes, Berlusconi largely vanished from politics after being ousted from power in 2011.

But he has emerged from the shadows this year and Forza Italia, with its traditional rightist allies the Northern League and Brothers of Italy, have combined backing of some 35 percent, according to polls, making them the largest single bloc.

"We predict a great victory for the centre-right," said Berlusconi, 81, looking thin and fit during a speech near Rome that effectively launched the Forza Italia election campaign.

While his allies have repeatedly denounced the European Union, Berlusconi said he wanted more Europe, not less, calling for common defence, foreign, industrial and fiscal policies.

"I do not think we can leave the euro," he said, further underscoring how the anti-euro rhetoric once heard from many Italian parties is receding as the vote nears.

Berlusconi, who had open heart surgery last year, cannot run for office due to a 2013 tax fraud conviction. But he hopes the European Court of Human Rights overturns this ban when it reviews his case in November.

"I expect that Europe completely restores my honour ... But court or no court, I promise you that I will take part in the election campaign," said the four-times premier.

If Forza Italia won power, he said he would introduce a flat tax and eliminate inheritance tax, hike minimum pensions, offer pensions to housewives and give more to impoverished families.

Berlusconi dismissed the chances of the ruling centre-left, saying the left was in retreat across Europe, and also took aim at the anti-establishment 5-Star Movement, which polls say is Italy's largest single party, with support under 30 percent.

The 5-Star is expected to chose the 31-year-old lawmaker Luigi Di Maio as its prime ministerial candidate next weekend. Berlusconi dismissed him as a "little political meteorite" with no practical know-how.

Highlighting his own long experience in business and politics, he said he wanted to make a pact with the devil to take 20 years off his life. He joked this his tan, brown hair and slim figure showed a deal might have been struck.

He also looked to swat down the hopes of Northern League leader Matteo Salvini, who has put himself forward as the natural prime ministerial candidate for the centre-right.

"We have always had respect for their ideas, but we created the centre-right and we have always been the leader to put its programme into action," Berlusconi said.

(Reporting by Crispian Balmer)

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Reuters