Thousands of workers had faced 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 managers.

But a government statement Friday said they had approved an enviromental clean-up and continued production at the the plant. It came after a lengthy meeting on the crisis.

The text of the decree aims to "guarantee the continued productivity and safeguard jobs at the Taranto factory while fully respecting basic demands for the protection of health and the environment," the statement said.

The business would have to invest the money required for cleanup operations, or else face penalties, it added.

Prime Minister Mario Monti hosted talks Thursday on the future of the giant steelworks.

"Government intervention was needed because Tarento is a strategic asset at the regional and national level," he said told reporters.

The decree is set to "save the environment, health and jobs," he added.

The 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 that revealed high cancer rates.

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

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