* Social media inexpensive as public campaign finance ends
* Italy has no laws governing online political content
* Media watchdog seeking self regulation - for now
By Steve Scherer
ROME, March 1 (Reuters) - The Italian election campaign is different from those of years past when the streets were lined with political posters and leaders rallied voters up and down the country.
The placards are few and far between and the only large rallies were held during the final week of the campaign for the March 4 vote. But in the virtual world, Facebook and other social media are full of political content.
Italian parties are harnessing social media to speak to voters, especially young ones, in part because they are strapped for cash. For the first time there will be no public refund to parties for their campaign spending and social media offers affordable ways to reach voters in a largely unregulated forum.
"The balance sheets of the parties range from disastrous to terrifying," said Vincenzo Smaldore, the chief content editor for Openpolis, an online group whose mission is to provide transparency in politics and public affairs.
In terms of regulation "social media are virgin territory for political campaigns," he said.
Five years ago, when the 5-Star Movement stormed into parliament for the first time with almost a quarter of the vote, it was the only party to leverage social media. Not any more.
"In this election campaign, there's been an almost total shift to social media," said Pietro Raffa, who runs online content for politicians and parties as a partner with communications consultancy MR & Associati in Milan.
The Internet has surpassed radio as a source of information, Italy's media watchdog Agcom said in a report last month.
While TV remains the top source of information and candidates make daily appearances on talk shows, almost 42 percent of Italians consult the Internet every day, with social media and search engines their main focus.
The rapid increase in Internet usage has outpaced lawmakers and regulators and begun to polarise political discourse.
"There's an echo chamber effect, which is problematic when the objective is to ensure citizens have media pluralism," said Antonio Nicita, a commissioner at Agcom.
The far-right League, which has one of the strongest social media presences of the parties, tweets or posts media reports of crimes committed by foreigners daily.
The party, part of a centre-right coalition that opinion polls show leading but falling short of an absolute majority, uses "Italians First" as its slogan, seeking to capitalise on fears tied to the arrival of more than 600,000 boat migrants over the past four years.
Amnesty International is monitoring Facebook and Twitter for offensive statements by Italian party leaders and candidates. In the 10 days to Feb. 20, half of all statements it thought fell into this category came from the League, while the rest came mostly from the other two centre-right parties, it said.
The monitoring revealed discourse "dripping with hostility, racism and xenophobia," Amnesty said in a report.
League leader Matteo Salvini denied the accusation and said he wanted to meet Amnesty to discuss it.
Democratic Party (PD) leader Matteo Renzi has lamented the danger of online disinformation. Even Pope Francis warned in January that fake news was "satanic", condemning the "manipulative use of social networks".
The postal police, which has jurisdiction over the Internet, has a button on its homepage for readers to flag fake news. In a little over a month, police have identified about three cases of disinformation per day, newspaper Corriere della Sera said on Wednesday.
"The obsession with fake news has been exaggerated in Italy," said Juan Carlos de Martin, co-director of the Nexa Center for Internet & Society at the Polytechnical University of Turin.
In the absence of specific laws, Agcom invited social media companies to regulate themselves during the campaign. Facebook and Google are taking part, while Twitter has not responded, Nicita said.
"If self-regulation works, then I can tell the legislator there's no need for new rules," Nicita said. "If not, I'll have to ask for new powers."
One initiative is Facebook's partnership with online fact-checker, Pagella Politica, to review articles posted in the news feed for accuracy.
Third-party groups are also pitching in. Openpolis is monitoring political adverts on Facebook and posting details about who is targeted. For example, the far-right Brothers of Italy party sent adverts to people who had shown an interest in the military police.
"People have little knowledge about how they are targeted by ads on Facebook," Smaldore said.
In a written response to questions, Facebook said it was providing more transparency in Canada about who places political adverts and what else they are running, with plans to extend this globally "eventually".
A group of Italian digital experts has launched an online observatory, Oohmm, to monitor social media, mainly Twitter.
"Everyday we monitor 50,000 to 100,000 automated tweets related to the campaign," said Renato Gabriele, one of the founders of Oohmm.
"All the bot accounts pretend to be normal people, but they aren't, and they amplify the message," Gabriele said. "It's like paying people to go to a rally in piazza and cheer for you."
With additional reporting by Massimiliano Di Giorgio and Francesca Piscioneri; Editing by Janet Lawrence