Italy, Libya set to finalise 'pact'

Italian and Libyan officials were finalising a pact yesterday that will see Italy pay compensation for misdeeds committed under colonial rule and improve ties between Rome and Tripoli, a major energy producer.

A source close to the Italian government said Prime Minister Silvio Berlusconi might travel to the Libyan capital today to seal the deal which has been under discussion for years.

"The delegations of the two countries are concluding negotiations at this moment at Mr Berlusconi's office) and the main lines of the deal should be finalised," the source said.

Last month, Libyan leader Muammar Gaddafi's son, Saif al Islam, said the deal "amounts to billions", without giving details or specifying the currency.

The compensation accord involves several projects including the construction of a motorway across Libya, education and clearing mines dating back to the colonial era.

Italy, which ruled Libya from 1911 to 1943, has had difficult relations with Col Gaddafi since he took power in 1969.

In 1970, Colonel Gaddafi expelled Italian residents and confiscated their property.

Rome has backed Tripoli's drive to mend fences with the West, which have improved dramatically since 2003 when Libya accepted responsibility for the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland. Libya has also said it would stop pursuing nuclear, chemical and biological weapons.

On August 14 Libya signed a deal with the US to settle both countries' claims for compensations for bombings.