Libyan leader Muammar Gaddafi and Italian Prime Minister Silvio Berlusconi laid the foundation stone yesterday for an ambitious highway stretching along the entire Libyan coast.
The 1,200 kilometre highway has long been demanded by Libya as compensation for Rome's occupation and colonial rule over the north African country from 1911 until World War II.
The foundation stone for the road, which will stretch from the Tunisian border in the west to the Egyptian frontier in the east, was laid at Touisha, about 50 kilometres east of Tripoli.
Mr Berlusconi arrived in Libya in early afternoon and was to share an iftar meal breaking the Muslim dawn-to-dusk Ramadan fast with Colonel Gaddafi before returning to Rome, an Italian official said.
His visit and the launch of the highway project formed part of celebrations marking the first anniversary of a friendship treaty signed between Libya and Italy a year ago.
Under the treaty, Rome will pay five billion dollars (€3.5 billion) in compensation in the form of investments over the next 25 years.
In return, Libya is to crack down on illegal migration from its shores.
Since May, Italy has returned around 1,000 illegal immigrants to Libya, according to estimates by Italian news agency Ansa. Mr Berlusconi's visit precedes Tuesday's 40th anniversary of the coup that brought Colonel Gaddafi to power in Libya - an event being shunned by top Western leaders.
The Italian government has said Mr Berlusconi would not be attending the celebrations, which come as Tripoli continues to take heat for the hero's welcome it offered convicted Lockerbie bomber Abdelbaset Ali Mohmet al-Megrahi.
Mr Megrahi's release from a Scottish jail on compassionate grounds sparked angry US reactions and allegations that it was part of a deal to secure trade and other concessions from oil-rich Libya.
Libyan newspapers splashed photographs of the homecoming of Mr Megrahi, the only person convicted of involvement in the bombing of a Pan Am flight over the Scottish town of Lockerbie, killing 270 people including 180 Americans.
Television showed images of Colonel Gaddafi embracing the convicted bomber.
Italian Defence Minister Ig-nazio La Russa announced on Saturday that Italy and Libya would stage joint military exercises as part of the friendship agreement, but gave no details.