On a cold and foggy Sunday morning, a battle for the hearts and minds of Italian voters is quietly under way in the medieval square of this town on the outskirts of Milan.

Bye Bye Silvio! reads a giant billboard put up by the leftist SEL party, whose leader has reluctantly thrown his weight behind Mario Monti's emergency government, tasked with rescuing Italy from financial disaster.

Just a few yards away, at a stand of the Northern League -- once Silvio Berlusconi's vital ally and now the only party refusing to support Monti -- the message is quite different.

Its poster depicts a hen laying golden eggs -- a metaphor for Italy's prosperous north which the League once wanted to cut off from the rest of the country -- in the rapacious hands of Roma Ladrona, or Rome the Big Thief, as many in the party call the capital and the central government.

Italy's next scheduled election is not until 2013, but the League is already campaigning.

After a decade as Berlusconi's most loyal coalition partner, the pro-devolution, anti-immigrant League has broken ranks in the centre right and now presents itself as the only political force fighting Monti's blood-and-tears reform agenda.

It bets the unpopular measures Monti was appointed to ram through will quickly erode support for his government, leading to snap polls next year -- and big wins for the League.

This is a government of bankers and technocrats, imposed on us by the markets and Europe. Why should we be ruled by the spread (between Italian and German bonds)? said Denis Zanaboni, a member of the local city government, which the League still runs in ticket with Berlusconi's PDL party.

Can the same people who created this crisis be the ones who resolve it? We are the only party in the opposition, the only ones who are saying no, we will not let you do that at the expense of the people.

He pointed to Monti's past spell as an adviser to Goldman Sachs and his close ties to the European and global policy-making elite, echoing comments made by leftist students who greeted the new government by throwing eggs and fake dollar banknotes at bank branches in several Italian cities.

FISCAL FEDERALISM

Monti's cabinet, hurriedly sworn in as Italy tries to put a lid on its soaring borrowing costs, comprises a mix of academics and experienced administrators, and includes Corrado Passera, the former chief executive of Italy's biggest retail bank, as industry minister.

The fact that none of the new cabinet has been elected may make it harder to win popular support for new taxes, job cuts or pension reforms that could hit ordinary Italians hard.

This government stinks, said the outspoken leader of the Northern League Umberto Bossi.

For the rank-and-file, the League is rightly going back to its roots as the defender of the interests of the hardworking and rich north threatened by central government and the poorer south which they see as corrupt and profligate.

While the call for a secession of the northern regions the League refers to as Padania is seen as more of a rallying slogan

than a concrete threat, the party is unflinching in its demand for fiscal federalism -- increasing local autonomy and cutting subsidies from the north to the south.

One key plank of the League's federalism agenda is to establish the standard cost for basic public services and make sure all regions and city governments adhere to it, or pay the difference out of their own pockets.

Luca Antonini, who heads the technical committee on federalism at the Economy Ministry, said in a recent interview that inefficiencies, corruption and mismanagement mean that the cost of maintaining a local police force in towns with 50,000 residents can vary from as little as 10 euros per citizen to as much as 120 euros, for example.

A hospital syringe can cost four times as much in the Mezzogiorno regions than in Lombardy, he said.

Why should we keep bankrolling the south? The north is tired of pulling the sleigh for everybody. Every year Lombardy gives 70 billion euros to the government and nobody knows how that gets spent, said 36-year-old Cristiano Vailati, who works for a gas company and has voted for the League since 1994.

The Northern League, formed in the aftermath of the 1990s corruption scandals which destroyed Italy's old political order,

faced increasing internal pressure during the last months of the Berlusconi government as grassroots supporters turned against the scandal-plagued premier.

Its core electorate of small businesses and the self-employed, who feel strangled by high taxes, punished the League in its northern heartland in local elections earlier this year. The party won less than 10 percent of the ballot in strongholds like Milan and Turin -- compared with more than 12 percent nationwide in the 2010 regional polls.

BERLUSCONI WHO?

Critics say the League is trying to sweep its Berlusconi links under the carpet and cast itself as a counter-weight to Monti.

After years of disasters with Berlusconi, the League is just trying to pretend they are virgins again, said the centre-left governor of Tuscany, Enrico Rossi, in a message on Facebook.

It may be an uphill struggle. An opinion poll in Corriere della Sera on November 21 showed that 42 percent of League's voters actually thought Monti's government would do well.

And, with just 60 seats out of 630 in the lower house of parliament, the League does not have the numerical strength to bring the government down in a no-confidence vote on its own.

But there is no doubt that there is simmering discontent and it is only likely to grow. The party's vocal opposition is sure to make headlines which could put it in a good position with sceptical MPs in other parties and tax-weary citizens when the austerity starts to bite.

What's going to happen to my pension? asked Franca Magnani, 56, who was made redundant a year ago by her employer, an online shopping catalogue.

Her unemployment benefits, 700 euros a month, will end in December. After 36 years of work, she was hoping to retire next year under a pension scheme allowing people to retire even at a relatively young age based on their length of service.

That scheme -- dubbed baby pensions by critics who say it has become unaffordable because of increased longevity -- is now likely to be scrapped as part of efforts to reduce Italy's towering public debt.

Around 65 percent of this type of pension is paid out in the north, where people generally start to work earlier, and the League firmly opposes any change.

Everybody tells me now: you are too young to retire. But who's going to pay my bills? I have been forced to start cleaning people's houses, Magnani said, rubbing her hands to keep warm as her 28-year-old son bought a bright green Northern League handkerchief at the party's stand.

To be honest, I don't trust anybody in government. They are always putting their hands in our pockets.

(Editing by Sonya Hepinstall)