BENGHAZI, Libya: Italian Prime Minister Silvio Berlusconi yesterday apologized to Libya for damage inflicted by Italy during the colonial era and signed a $5 billion investment deal by way of compensation.

Berlusconi made the apology during a visit to the Mediterranean city of Benghazi for a meeting with Libyan leader Muammar Qaddafi to seal a cooperation accord with the North African nation.

Speaking on behalf of the Italian people, he expressed regret for the “deep wounds caused by Italian colonization to the people of Libya.” He and Qaddafi then signed a “friendship and cooperation agreement” aimed at recompensing Libya for damage incurred during the colonial era.

“The accord will provide for $200 million a year over the next 25 years through investments in infrastructure projects in Libya,” Berlusconi said in remarks translated into Arabic.

“This agreement should put an end to 40 years of discord. It is a concrete and moral acknowledgment of the damage inflicted on Libya by Italy during the colonial era,” he told reporters.

Formerly a part of the Ottoman Empire, Libya was occupied by Italy in 1911 before becoming a colony in the 1930s. The country gained its independence in 1951 after a brief period under a UN-mandated Franco-British administration.

Italy and Libya have spent years negotiating a wide-ranging treaty to cover compensation for Rome’s military occupation and colonization.

US Secretary of State Condoleezza Rice is set to follow in Berlusconi’s footsteps next week, for the first visit by such a high-ranking US official to Libya since 1953.

Berlusconi, on his second trip to Libya since June, said that among the major projects to be financed by Italy will be a coastal motorway from the Tunisian border to Egypt.

Rome will also fund house construction, scholarships for Libyan students to study in Italy and pensions for those mutilated by land mines laid by the Italian military.

The agreement will also cover cooperation on the fight against illegal immigration, which Berlusconi termed a battle “against slave traders.” Funding for the coastal highway was promised by Berlusconi on a visit to Tripoli in 2004, when he headed a previous administration.

Berlusconi’s visit to Benghazi, 1,000 km east of Tripoli, coincides with the anniversary of the coup that brought Qaddafi to power on Sept. 1, 1969.