Italian Prime Minister Mario Monti hosted talks on Thursday on the future of the giant ILVA steelworks in southern Italy, which have been shut down as part of a long-running dispute over pollution levels.

Thousands of workers face losing their jobs at the Taranto plant, the biggest steel mill in western Europe, which was shut down this week after prosecutors seized its production and issued arrest warrants for its managers.

The company also shut down other facilities dependent on the Taranto plant.

"Italy's industrial and manufacturing future is at stake," Giorgio Squinzi, head of the Confindustria big business association, was quoted as saying at the talks with ministers, trade union leaders and local officials.

Participants quoted Monti as saying: "This is a real test for our country."

Around 300 workers from other ILVA facilities around Italy protested in Rome during the government meeting, with many accusing the company's owners Riva Group of neglecting environmental standards for the sake of money.

"Riva only wanted to make a profit without spending a cent on safety and the environment," said Saverio Eletto, 46, from the Novi Ligure facility, as he rallied outside parliament despite heavy rain in the Italian capital.

Moreno Vacchina, 46, also from the Novi Ligure plant, said: "We are here to ask the government to speed up a decree to save ILVA in Taranto."

Tonio Anselmo, 46, said: "Riva made money and poisoned the city."

The Taranto plant, which was struck by a tornado on Wednesday, had already been running at reduced capacity since magistrates ordered parts of it closed in July after an inquiry into damning reports of high cancer rates.

The company has denied any link between its activities and the cancers.

The dispute has pitted workers fighting to keep their jobs amid high unemployment despite possible health hazards against environmentalists and prosecutors who want the site cleaned up immediately.

The environment ministry is also in a stand-off with local prosecutors as it tries to find a middle ground that would keep jobs and ensure a clean-up.

"It is crucial to resolve the ILVA case in order to avoid worse situations," said Stefano Fassina, chief economic expert at the main centre-left Democratic Party, a lawmaker who came to support the demonstration in Rome.

"While the agenda is being dictated by conservative governments, the situation can only worsen and social tensions can only increase," he said.