Italy's ties with former colony Libya hit a snag today when its air force jets, invited to celebrate Muammar Gaddafi's 40 years in power, refused to trail green smoke instead of Italy's red, white and green.

Italy's opposition is furious that the "Tri-Colour Arrows" acrobatic jets are participating at all in Tripoli because of Gaddafi's decision to receive Lockerbie bomber Abdel Basset al-Megrahi on his return home from a Scottish prison.

Prime Minister Silvio Berlusconi, criticised for visiting Gaddafi in Tripoli on Sunday to celebrate the first anniversary of a friendship treaty that has unleashed major contracts for Italian firms, said it was red, white and green, or nothing.

"I agreed last night with the defence minister that the Tri-Colour Arrows will only fly with the tri-colour display," he said on a visit to Poland.

Asked by reporters if that meant the squadron would not participate otherwise, he said: "Yes."

The Italian jets later did their overfly spewing out the three colours of the national flag.

Italy's ambassador had earlier said Libya insisted on the fly-past releasing all-green smoke -- green being the colour of the Libyan flag and the traditional colour of Islam. Gaddafi is a self-styled defender of the Islamic faith.

Berlusconi has put Italy at the forefront of diplomatic and commercial overtures to Gaddafi, who has visited Rome twice this year following the 2008 treaty under which Italy agreed to pay $5 billion compensation for colonial misdeeds from 1911-1943.

"I think our trade diplomacy is yielding extraordinary results," Berlusconi told his family's newspaper Il Giornale today, listing some major Libyan contracts won by Italian firms like oil and gas group Eni and power firm Enel.