(Repeats story from Wednesday)
* Salvini's right-wing League is Italy's most popular party
* Leader reverses policy in favour of euro exit
* Says Italy needs political axis with Germany
* Seeks pivotal role in Europe, centre-right dominance at home
By Gavin Jones
ROME, Dec 12 (Reuters) - Right-wing firebrand Matteo Salvini is softening his eurosceptic policies in a bid to capture the middle ground of Italian politics and eventually take centre-stage in Europe, even if it means disappointing his more radical supporters.
Setting a new course for his increasingly popular League party, in the last few days Salvini, who is deputy prime minister and interior minister, has scrapped its previous anti-euro position and vowed to reform the EU "from the inside".
In a seismic shift, he even said Italy should forge a political "axis" with Germany, a country the League has always accused of commandeering the euro zone for its own benefit while condemning Italy to economic decline.
"The Franco-German axis is showing its limits, I will do everything I can to renew a new Rome-Berlin axis," Salvini told foreign reporters in Rome this week.
He acknowledged that the last "axis" between the two countries, in World War Two, had not ended well.
Salvini, say League insiders and analysts, has a two-pronged strategy: to appeal to more moderate and undecided voters while carving out a pivotal role for himself on the European stage after elections to the European parliament in May.
When in 2013 Salvini became leader of what was then called the Northern League, it was reeling from a corruption scandal and was backed by less than 4 percent of Italians. His success since then has been remarkable.
Campaigning on a fiercely anti-migrant and anti-euro platform, he attracted voters who resented high unemployment, stagnant wages and uncontrolled immigration from Africa, while transforming the party from a regional to a national force.
The League took 17 percent of the vote in March elections to become the largest party in a centre-right bloc which Salvini then abandoned to form a government in June with the anti-establishment 5-Star Movement.
The League is now Italy's largest party with more than 30 percent support in opinion polls.
Giovanni Orsina, professor of politics at Rome's LUISS University, said Salvini was a shrewd politician whose recent policy shifts were just the latest stages of a long-term strategy going back years.
"When he had 3 percent of the vote Salvini needed very extreme rhetoric to get himself noticed and build support, but now he is in government he doesn't have to be so radical and he is moving towards the centre," Orsina said.
Salvini, a formidable communicator with a huge social media following, made no apologies when asked this week about his new desire to engage with EU institutions rather than fight them.
"The world changes, this is a phase when we need common sense and concrete solutions," he said.
His U-turn on the euro has been particularly striking.
The League's March election programme said the euro was "the main cause of our economic decline" and proposed a "return to a pre-Maastricht situation", a reference to the 1992 treaty that paved the way for the single currency.
The party promised to prepare for euro exit and look for partners in Europe with whom to quit the currency together.
On Sunday, Salvini said in an interview with state television: "We don't want to leave anything, we want to change the rules of the EU from the inside."
The following day he said the League had dropped talk of leaving the euro "some years ago."
The coalition's government "contract" drawn up in May made no reference to exiting the euro. That was because of resistance from 5-Star and the head of state, as well as fears of a market backlash.
Claudio Borghi, the League's economics spokesman and one of Italy's best-known eurosceptics, toured the country with Salvini in 2014 to present a 31-page pamphlet, penned by Borghi, entitled: "Quit the euro: how to get out of the nightmare."
Yet he was "neither disappointed nor surprised" by Salvini's change of stance. It showed an ability to adapt to political circumstances, he said.
"I am practical, you have to act on the basis of what is possible and now it's useless to talk about leaving the euro because it's not possible," Borghi told Reuters.
The proposed axis with Germany was aimed at exploiting the weakness of French President Emmanuel Macron, struggling with street protests against his government, in a strategy focused on the European elections in May.
"Salvini could become the strongman of Europe ... it's an incredible opportunity," Borghi said, forecasting that European right-wing and anti-system parties, led by the League, could overtake the Socialists and vie for power with the centre-right.
Some of the League's more diehard supporters are less enthusiastic. They are disorientated by Salvini's change of tack on the euro and have vented their frustration on social media where they accuse the party of betrayal.
However, Orsina said Salvini had little to fear because, bar a few minuscule movements, "there is nothing to the right of the League" for angry hard-right or eurosceptic voters to turn to. On the other hand, by presenting a less extreme image, he had "enormous political space" to exploit by attracting moderate, undecided voters.
Salvini's less hostile approach to the EU and the euro is also likely to please the business community in the League's northern heartland, where some have complained the party is not doing enough to help companies.
Lorenzo Pregliasco, head of polling and political analysis firm YouTrend, said Salvini's latest moves were aimed mainly at draining support from Forza Italia (Go Italy!), the conservative party led by his pre-election ally Silvio Berlusconi.
Forza Italia, which dominated the centre-right for more than two decades until the last election, got 14 percent at the March vote and is now polling at around 8 percent.
"Salvini wants to complete his takeover of the centre-right, and the best way is to increase his appeal to the centre," Pregliasco said. If the strategy works, the League could get close to 40 percent at the European elections, he forecast. (Editing by Giles Elgood)
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