By Crispian Balmer and Gavin Jones
ROME (Reuters) - Italy's right-wing League leader Matteo Salvini failed to overturn decades of leftist rule in the northern region of Emilia-Romagna on Sunday in an election that brought relief to the embattled government.
Salvini had campaigned relentlessly in the region since the start of the year, seeking a shock victory that he hoped would bring down the fractious national coalition, which includes the center-left Democratic Party (PD).
But in the event, his League party fell well short, with its candidate taking 43.6% of the vote against 51.4% for the incumbent PD governor Stefano Bonaccini.
"(Salvini) is the big loser in this election because the people saw it as a referendum in him," said Prime Minister Giuseppe Conte, adding that he expected his coalition would survive until the end of the legislature in 2023.
Italian government bonds rallied, with yields falling to their lowest in three months as markets saw the result as positive for the stability of the 5-month old government.
There was no obligation for the government to resign had Salvini won, but after eight consecutive regional election victories, another triumph in Emilia-Romagna would have put the bickering coalition under intense pressure.
"We did everything humanly possible and even a bit more," Salvini said on Monday, adding that he was "absolutely satisfied" to have eroded the left's support in its traditional heartland, which is home to the Ferrari sports car.
Salvini's rightist bloc did secure a resounding victory in a separate regional election on Sunday in the underdeveloped southern toe of Italy, Calabria.
Salvini said he would now redouble his efforts to prepare for a raft of other local ballots this year, from Campania in the south-west to Veneto in the north-east.
5-STAR CRISIS
While the PD dodged disaster in Emilia-Romagna, its coalition partner, the anti-establishment 5-Star Movement, had a disastrous day, taking just 4.7% in the north and 6.2% in Calabria.
The party was the largest group in 2018 national elections with 33% backing, but has seen its support slide in recent months leading to a wave of defections amongst its lawmakers and the resignation of its leader Luigi Di Maio.
Its caretaker leader Vito Crimi said on Monday the party must stick together and continue to support the government.
Political analysts predicted that Sunday's results would weaken 5-Star's standing within the coalition and give the PD more power to drive its own policy priorities, at the risk of generating further strife within the cabinet.
"Looking ahead, the government will likely continue to struggle to deliver on most policy fronts ... The 5-Star will be internally torn, at the very least, until its planned congress in March," said Wolfango Piccoli of the London-based political risk consultancy Teneo.
In a political blunder, Salvini walked out of government with 5-Star last August, expecting to trigger a national election that polls predicted he would win. Instead, 5-Star joined up with the PD and shunted him into opposition.
"I look forward in the next few days to engaging with the various coalition forces to relaunch (the government), identify priorities, define a clear timeline and set the agenda for 2023," said Conte, predicting that Salvini would remain barred from power for at least the next three years.
(Additional reporting by Angelo Amante, Giuseppe Fonte and Giulia Segreti; Editing by Edwina Gibbs, Catherine Evans and William Maclean)
