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Prime Minister Silvio Berlusconi will try and revive Italy's battered EU presidency Friday after Germany agreed to draw a line under a row sparked by the Italian leader comparing a German lawmaker to a Nazi.

Italian Prime Minister Silvio Berlusconi wipes his brow as he sits in the European Parliament in Strasbourg July 2, 2003. [Reuters]

Italy's six months at the helm of the bloc got off to a disastrous start after Berlusconi made the Nazi jibe in the European Parliament Wednesday, prompting German Chancellor Gerhard Schroeder to demand a full apology.

Schroeder said Thursday after the two leaders spoke on the telephone that he had accepted Berlusconi's "regret" for the slur and as far as he was concerned the issue was closed.

Italy, which took over the presidency on July 1, will host a meeting of European Commissioners in Rome Friday to mark the start of work on its ambitious agenda.

Berlusconi, who is due to hold a joint news conference with EU Commission President Romano Prodi at 1300 GMT, will try to use the occasion to start mending the damage to a presidency he had hoped would be his crowning moment.

Italian President Carlo Azeglio Ciampi, speaking at a gala dinner late Thursday attended by Berlusconi, Prodi and the entire Italian cabinet, was at pains to defuse tensions.

"We cannot allow the painful polemics that shook the (European Parliament) debate to weigh on any future work," said Ciampi.

BERLUSCONI SERIOUSLY OFFENDED

European politicians of all colors had put huge pressure on Berlusconi to apologize for saying German lawmaker Martin Schulz, a member of Schroeder's party, would be perfect in the part of a Nazi concentration camp guard in an upcoming film.

After his phone call with Schroeder, Berlusconi said he regretted any misunderstanding over his comment but he had been seriously offended by criticism from Schulz -- a statement that fell short of a full apology.

Schulz infuriated the Italian billionaire by accusing him of a conflict of interest between his political office and his extensive media empire.

With good grace, Schroeder said after talking to Berlusconi that he hoped Italy's presidency would get back on track.

"Everybody must concentrate on making sure that Europe moves forward with its business," said Schroeder, noting that the bloc hopes to finalize a new constitution during Italy's tenure.

Spanish Foreign Minister Ana Palacio also struck a positive note, saying she had no doubt the Italian presidency would be excellent.

Other EU politicians were less charitable. Dutch Prime Minister Jan Peter Balkenende said it would have been better for Berlusconi to retract the remark at once, while Luxembourg said Prime Minister Jean-Claude Juncker was "shocked" at the jibe.

The Europe-wide outcry suggested it would take more than an ambiguous statement of regret from Berlusconi to draw the final curtain on the saga.

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