Romano Prodi said that Shimon Peres, the Israeli deputy prime minister, told him on Thursday that Israel would withdraw from the territory, but did not provide details of any timeline for the withdrawal of forces.

UN Secretary-General Kofi Annan had urged Israel to withdraw fully as soon as 5,000 peacekeepers were deployed in southern Lebanon, around double the number there at present.

However Ehud Olmert, the Israeli prime minister, had rebuffed the demand during Annan's visit to Israel on Wednesday, saying Israeli troops would stay until all parts of UN resolution 1701, which halted hostilities with the Hezbollah militia group on August 15, were met.

Israeli troops had occupied a security zone about 15 km (nine miles) inside of Lebanon at the time of the ceasefire, and Israel has been slowly transferring control of that zone to arriving Lebanese and UN troops since then.

Italy is to provide up to 3,000 troops for the UN force, which will total up to 15,000 when fully deployed by November, alongside Israeli forces.

Peres' comments come as Annan arrived in the Syrian capital of Damascus in the latest leg of his Middle East tour in a bid to shore up the ceasefire between Israel and Hezbollah.

Recovery efforts

Meanwhile, about 60 governments and aid organisations are meeting in the Swedish capital, hoping to raise $500 million to help Lebanon rebuild infrastructure after the 34-day war between Israel and Hezbollah.

Much of southern Lebanon is still
littered with Israeli ordinance

In a report to the Stockholm conference on Thursday, the Lebanese government said it was too early to assess the full extent of the damage, but projected that early recovery efforts would cost about $540 million.

Conference host Jan Eliasson, Sweden's foreign minister, dismissed suggestions that the aid money would trickle down to Hezbollah and strengthen the group's position in southern Lebanon.

"I don't accept that argument," Eliasson said before the meeting. "This conference aims at strengthening the central government of Lebanon and in that government Hezbollah is only a minor part."

The Lebanese government, along with the UN Development Programme, has identified an list of early recovery efforts, including finding housing for displaced families, rebuilding infrastructure, improving social services and clearing unexploded ordnance.

Some research has estimated that up to 70% of Israeli bombs failed to explode.

Fighting started in southern Lebanon on July 12 when Hezbollah fighters crossed the border at Aita al-Shaab, killed three Israeli soldiers and seized two others.

The attack provoked an onslaught from Israel, which pounded Hezbollah strongholds in Lebanon as well as key infrastructure for more than a month.

About 1,100 Lebanese people, mostly civilians, were killed, while more than 150 Israelis, mainly soldiers, also died in combat or in Hezbollah rocket attacks on northern Israel.

An estimated one million people fled their homes during the fighting.