ROME (AP) _ The Italian government offered a concession Friday to Communists _ a shorter work week _ in hopes of ending an impasse in the battle over the 1998 budget.

The fight threatens to bring down Premier Romano Prodi's center-left government in the midst of its drive to make Italy a founding member of the common European currency.

The Communist Refoundation party, a key government ally, opposes the 1998 budget because it makes deep cuts in social spending and doesn't do enough to reduce unemployment. One of its demands is cutting the work week to 35 hours, which could help create jobs.

Prodi has refused to rewrite the budget, insisting that its deficit-cutting measures are the key to the euro. On Friday, however, he said he was willing to consider cutting the work week by five hours.

Labor leaders greeted Prodi's offer warmly and the Milan stock market closed higher on optimism about a budget deal. The MIB30 index finished up 1.4 percent and the blue chip index rose 1.6 percent.

Refoundation leader Fausto Bertinotti said the party was considering the idea ``with great interest.''

``We want a law reducing work week to 35 hours by the year 2000. And we want confirmation that old-age pensions won't be touched,'' he said. ``It's simple. This is what we want.''

President Oscar Luigi Scalfaro, meanwhile, made no secret of his impatience with Refoundation and the crisis it has provoked. He said Friday it would a ``crime'' to block Italy's road to the euro.

Although Refoundation, which got 8 percent of the vote in national elections, is not part of the government coalition, Prodi needs its votes in the lower house of parliament to muster a majority.

Prodi unveiled the proposal during a Franco-Italian summit in Chambery, France. He said funds to finance a shorter work week could be found in the 1998 budget. He also said he was confident a compromise with Refoundation could be reached.

``I continue to believe that five years of sacrifice must not be thrown away, I believe in reason,'' Prodi said.

His concession was contained in a document signed at the summit citing a shorter work week as a common goal for France and Italy.