ROME, Jan 18 (Reuters) - Italy urged Eritrea on Monday to give its full backing to Organisation for African Unity (OAU) proposals for a peace deal with neighbouring Ethiopia.

The Foreign Ministry said in a statement that Foreign Minister Lamberto Dini had written to his Eritrean and Ethiopian counterparts to try to promote a solution to their conflict.

``The messages underlined the need for the peace plan to be launched in accordance with the proposals for a framework agreement outlined by the OAU the full acceptance of which by Eritrea, after that of Ethiopia, should be encouraged,'' it said.

The statement said Italy, the former colonial power, intended to step up efforts to encourage peace.

``A renewal of hostilities after their de facto suspension last June needs to be avoided,'' the statement said.

It urged the creation of conditions for dialogue to avoid ``a sterile, disastrous conflict.''

Eritrea said earlier this month it had intelligence reports that Ethiopia was preparing military attacks along their border but Ethiopia responded that Eritrea was trying to divert attention from its own military plans and from peace proposals it had rejected.

Last May, the border dispute erupted into a war in which hundreds were killed. The fighting died down quickly but both sides reinforced their positions along the 1,000-km (625-mile) border and engaged in a virulent war of words.

The OAU has tried to negotiate a peace deal but Eritrea has rejected the OAU's proposal that it withdraw to positions it held before fighting started on May 6.

Eritrean President Isayas Afewerki has instead called for international monitors to police the disputed border while ownership is established and for direct talks with Ethiopian Prime Minister Meles Zenawi.

Ethiopia rejects that proposal, saying it will not open talks until Eritrea pulls back its forces.