The two governments issued a joint statement on the investigation into the March 4 death of agent Nicola Calipari, who was killed after securing the release of an Italian hostage who had been held by Iraqi militants. U.S. soldiers fired on the Italians' vehicle as it approached a U.S. checkpoint near Baghdad's airport.
For days it was clear Italy and the U.S. were struggling to find an agreement, but they weren't able to reach a shared position, reports CBS News Correspondent Sabina Castelfranco.
In the statement, the two countries said the investigation into the shooting had been concluded.
"The investigators were unable to reach shared final conclusions, but after having jointly examined the evidence, they did agree on facts, deductions and numerous problematic recommendations," the statement said.
The statement said the two countries would now refer the case to their respective national authorities. Italy has launched its own criminal inquiry into the death.
Italy and the United States had worked for a month on the joint investigation in the killing, which sparked outrage in Italy and put increasing pressure on Premier Silvio Berlusconi.
But from the start, testimony from the two survivors of the shooting clashed with the U.S. military's account.
The Americans maintain that soldiers fired warning shots in the air, then shot at the engine block because the car was speeding. The ex-hostage, journalist Giuliana Sgrena, and another intelligence agent who was driving the car, insist they saw the beam of a warning light virtually at the same time gunfire broke out. The agent has also testified he was driving slowly.
"Out of a dutiful homage to Calipari, and out of an indispensable national dignity that a government must have, the Italian government could not have been asked to sign off on reconstruction of the facts that as far as we know does not correspond to what happened that night," Foreign Minister Gianfranco Fini told reporters after the statement was released.
Castelfranco reports that Berlusconi is now likely to come under even more pressure to withdraw the estimated 3,000 Italian troops from Iraq. The prime minister made clear this week Italy would not sign the report on the investigation if it was not convinced with the findings.
The incident has also strained relations between the U.S and Italy.
However, the statement tried to smooth over the differences.
"The alliance between Italy and the United States remains firm and there is a strong and solid friendship between the two countries based on shared values," the statement said. "Such values require us to remain by the side of the Iraqi people ... to contribute to the reconstruction of a stable, democratic and safe Iraq."
Calipari, hailed at home as a hero, died while trying to shield Sgrena from the gunfire.
In the statement, the two countries called Calipari an "extraordinary man" who gave his life for Italy and was "an esteemed friend of the United States."
Berlusconi had put his government's prestige on the line with assurances to the nation that full light would be shed on the shooting. The war in Iraq was highly unpopular among Italians, who also opposed the deployment of Italian troops in Iraq to help reconstruction.
Pressure on his coalition grew after news reports suggested the final report into the killing would exonerate the U.S. soldiers. The soldiers had been on high alert at the time because the U.S. ambassador, John Negroponte, had been due to pass by the checkpoint.