Rome - Italian Prime Minister Silvio Berlusconi announced on Saturday that his country is to invest five billion dollars over the next 25 years as part of a compensation deal for years of colonial rule over the North African state.

Speaking during a visit to the coastal city of Benghazi, Berlusconi said the accord between Italy and Libya "will provide for 200 million dollars a year over the next 25 years through investment projects in Libya."

The main initial projects include a coastal motorway and a mine- clearing project.

Bilateral relations between the two countries have long been hobbled by Libyan resentment over the Italian colonial past. Ruled from Rome since 1911, Libya became independent in 1951.

"This agreement should put an end to 40 years of discord. It is a concrete and moral acknowledgement of the damage inflicted on Libya by Italy during the colonial era," Berlusconi said.

The current visit is Berlusconi's second since June. Previously he pressed the Libyan leader Moamer Gaddafi to help stem the flow of illegal immigrants from Africa to Europe.

Libya's relationship to the rest of the world has warmed since 2003 when it publicly stated that it was ending efforts to acquire weapons of mass destruction. The charismatic Gaddafi has ruled since a military coup in 1969.

US Secretary of State Condoleezza Rice is due to make the first high-ranking American visit to Libya since 1953 next week. (dpa)