Zagreb - Croatia's government has agreed to pay 78 million euros (101 million dollars) in damages to firms from Italy and Austria for claims arising from a cancelled highway project and a bank privatization, a local media report said Thursday.

The Croatian news portal business. hr, quoting a government source, said the settlements involve 44.3 million euros for Rome-based builder Astaldi SpA and 34.5 million euros for Austrian-based Hypo Alpe Adria Bank AG.

Croatia in 1999 cancelled Astaldi's concession to build a highway from the capital Zagreb to the Hungarian border.

An arbitration court ordered Croatia to pay compensation in 2004.

Alstaldi agreed to cut 10 million euros from the principal and accumulated interest, business. hr said.

Hypo Alpe Adria won an arbitration panel verdict last year over claims that balance sheets of Slavonska Banka underreported bad loans before the Croatian bank's 1998 privatization.

The Austrian bank agreed to reduce its claim by some 10 million euros less compensation under the settlement, news reports said.

Astaldi was to be paid from the state budget, while the Croatian agency formed to clean the banking sector of bad loans would make the payment to the Hypo Alpe Adria.

Astaldi and Hypo Alpe Adria had no immediate comment.

Croatian Prime Minister Ivo Sanader's government was expected to announce the settlement officially on Friday. (dpa)