Berlusconi apologises over Nazi gibe. But has this imbroglio turned his presidency into a bad joke?
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The Italian Prime Minister, Silvio Berlusconi, apologised yesterday for likening a German MEP to a concentration camp collaborator, after his extraordinary gaffe took the EU to the verge of a full-blown diplomatic crisis.

Mr Berlusconi's humiliating climbdown was made last night in a telephone call to Gerhard Schröder, the German Chancellor, who had made plain his anger at the comments by describing them as "completely unacceptable".

On several occasions on Wednesday, Mr Berlusconi refused requests to apologise, including one from Pat Cox, the president of the European Parliament. But faced with the public wrath of Germany, the EU's largest member state, criticism from two other European nations, a domestic backlash and a torrent of outrage across the continent, Mr Berlusconi issued a partial retraction, in what some saw as a grudging apology.

Mr Berlusconi's office said he had expressed "his regret for the fact that somebody might have misunderstood the sense of a joke that was only meant to be ironic". Mr Schröder said that his Italian counterpart had "expressed his regret about the choice of this expression and comparison" and seemed satisfied enough to add: "I told him that for me the matter was closed."

On Wednesday, Mr Berlusconi had responded after the German socialist Martin Schulz accused the Italian billionaire of a conflict of interest between his political office and his media empire. Mr Berlusconi said: "I know there is a producer in Italy who is making a film on the Nazi concentration camps. I will suggest you for the role of kapo. You'd be perfect."

Even Gianfranco Fini, Italy's Deputy Prime Minister and a member of the "post-fascist" National Alliance, disowned the comments, raising the possibility of a domestic political turbulence that could threaten the coalition government.

Despite Mr Berlusconi's volte-face last night, there was no doubting the depth of the damage to Italy's six-month presidency of the EU, which was just two days old when the comments were made. And there was growing concern over the Italian Prime Minister's ability to handle sensitive negotiations, given his reaction to criticism from MEPs.

After the exchange, Mr Schröder's office summoned the Italian ambassador to Berlin to protest against the gibe and the Italians responded by summoning the German envoy to condemn the comments made by Mr Schulz, an MEP from Mr Schröder's Social Democratic Party. All day yesterday, until he made his phone call, Mr Berlusconi had rejected any idea of apologising. The Italian leader described his remarks as an ironic joke, which the translators had failed to convey, and also blamed left-wing critics for orchestrating the criticism.

By the afternoon three nations had publicly condemned Mr Berlusconi, whose job it is to chair meetings of his fellow prime ministers. That threatened to make his position as president of the European Council almost impossible unless he retracted his remarks.

Jean-Claude Juncker, the Prime Minister of Luxembourg, said in a statement he was "shocked" at the comments and called them "unacceptable between democrats". Mr Juncker said that Mr Schröder was "absolutely right to request a formal apology".

While Tony Blair tried to stay out of the dispute, Peter Hain, the Leader of the Commons, said Mr Berlusconi should adopt a mantra from the comedy series Fawlty Towers: "Don't mention the war."

Robin Cook, his former cabinet colleague who heads a group of Europe's centre-left parties, said he was appalled that an EU president "should cause such offence and revive conflicts which the rest of us long put behind us".

The dispute overshadowed the launch of Italy's EU presidency, which diplomats admit is already badly damaged.

All 20 European commissioners will visit Rome today to discuss the priorities of the EU presidency with Mr Berlusconi. Romano Prodi, the European Commission president and a former Italian premier, has so far avoided comment but will face the press today.

His spokesman said that "everyone here and in the Commission would have preferred that it would not have happened". Privately, one senior Commission official described Mr Berlusconi's comments as "blatantly stupid". The row also provoked continuing rifts within the European Parliament. Yesterday, centre-right MEPs blocked a socialist-backed proposal demanding a formal apology. Instead, the Parliament agreed that Mr Cox should speak to Mr Berlusconi to seek a "fair and balanced solution".

Mr Berlusconi has previously spoken of the superiority of Christianity over Islam and launched a tirade against Finland at an EU summit when Italy failed to be chosen as the site of a new EU food agency.

His comments might have boosted the case for replacing the EU's system of rotating presidencies with a semi-permanent president of the council. That has been proposed by the former French president Valéry Giscard d'Estaing, who is drawing up a draft constitution for the EU.