Rome, Aug 22 (IANS/AKI): Libyan leader Muammar Gaddafi is on the verge of losing power as rebels surround his compound and three of his sons are arrested, Italian Foreign Minister Franco Frattini said Monday, calling on him to step down.

"The walls are closing in on the dictator's compound," he said.

"The situation can bring disastrous consequences if in the next few hours Gaddafi doesn't announce his decision surrender and turn himself in," Frattini said.

Prior to joining a UN-mandated military campaign against Gaddafi's forces in March, Italy was Libya's closest trading partner. In one trip to the North African country, Italian Prime Minister Silvio Belusconi kissed Gaddafi's hand.

Three of Gaddafi's sons have reportedly been captured by rebel forces who encountered little resistance when they entered the Libyan capital Tripoli Sunday.

Libyan Information Minister Moussa Ibrahim told CNN that the government still had 65,000 loyal soldiers fighting under for Gaddafi's government while a rebel spokesman said those forces control up to 20 percent of Tripoli.

The rebels' Transitional National Council is ready to move to Tripoli, according to Ali Suleiman Aujali, who is the rebel government's ambassador to the US.