By Silvia Aloisi
MILAN, Aug 25 (Reuters) - The head of Libya's rebel government warned on Thursday of dangerous destabilization in the country without urgent financial aid from the West to restore services to the population.
Mahmoud Jibril spoke after meeting Italian Prime Minister Silvio Berlusconi, who said Rome had begun unfreezing 350 million euros of Libyan funds in Italian banks to help the rebel government run the country.
Berlusconi said the unfreezing was a first step in a broader effort to unblock all of the country's assets in Italy, the former colonial power.
Italy, once Libya's biggest ally in the West, froze around $8 billion of Libyan assets as part of sanctions against Muammar Gaddafi.
"The biggest destabilizing element would be the failure of the (rebel) National Transitional Council to deliver the necessary services and pay the salaries of the people who have not been paid for months," Jibril said at a news conference in Milan.
"Our priorities cannot be carried out by the government without having the necessary money immediately," he said.
Tripoli, taken by the rebels in a lightning advance earlier this week, was without water supplies, Berlusconi said.
He added that Eni, the biggest foreign oil operator in Libya, is expected to sign a deal to supply gas and petrol for the immediate needs of Libyans.
"Eni and the provisional government will sign a deal as early as Monday in Benghazi that allows us to supply upfront without payment large quantities of gas and petrol for the immediate needs of the Libyan population," he said.
ENI CEO Paolo Scaroni told reporters the supply of natural gas and gasoline would be in exchange for "future payments in oil which we will receive when the oil fields have restarted."
Berlusconi welcomed what he described as a willingness of the rebels to include all sides and components of civil society in a new government and to avoid vengeance against Gaddafi supporters.
Jibril said the rebel government's top priority was to restore law and order, establishing a new national army and collecting weapons from the streets. It would have to rebuild power stations and other infrastructure destroyed by Gaddafi loyalists, he said.
Scaroni, who met Jibril with Berlusconi, said it would take six to 18 months to fully resume its oil operations in Libya. He said the company's priority was to get its gas flows working again.
"Our focus is on gas since I don't like at all the idea of going in to winter with a traditional source of (gas) supply blocked. We can live without Libyan gas but it's not as if we're totally relaxed about the other suppliers," Scaroni said.
Italy's biggest gas suppliers are Algeria and Russia.
(additional reporting by Gianluca Semeraro; Editing by Barry Moody)