The offer, negotiated by the consumer groups, is an attempt by Costa Cruises to limit the legal fallout of the accident.

Each passenger would also receive a refund on the cruise and costs of their return home. The offer applies to all passengers,

whether a child or an adult, who suffered no physical injuries. Injured passengers will be dealt with individually.

Those accepting the offer would have to agree to drop all future litigation, and receive payment within seven days.

Costa Cruises' U.S. parent company Carnival Plc (CCL.N) is already facing legal action for compensation.

Codacons, a consumer group which did not participate in the negotiation, is collecting names for a class action suit to be filed in Miami requesting 125,000 euros for each passenger.

Carlo Rienzi, president of Codacons, said the offer was insufficient and urged passengers to see a doctor to check whether they had suffered psychological trauma.

Meanwhile, John Arthur Eaves, a U.S. personal injury lawyer, is urging passengers to file individual lawsuits in the United States. Eaves represented families of some of those killed when a U.S. military jet struck and severed cables holding skiers in a cable car in northern Italy in 1998, killing 20.

"The class action is not the right tool for this case," Eaves told Reuters Television. "In this case people need to be treated like individuals. Everyone in this boat had different damages."

But Roberto Corbella, head of Italy's association of tour operators, and who helped Costa negotiate the offer with the consumer protection groups, urged passengers to accept it.

"Lawsuits have uncertain outcomes, they take a long time, there are legal costs, and some studies indicate that it's not at all certain that passengers would get more than the company is offering," he told Reuters Television.

Crew member Gary Lobaton has already filed a lawsuit against Carnival in a U.S. district court. His lawyers said in his court filing that he was not aware of the "dangerous conditions" of the cruise ship until it was too late to abandon it safely.

On Thursday, Italy's top-ranking Coast Guard official, Marco Brusco, said Concordia Captain Francesco Schettino lost "a precious hour", which made evacuating the ship more difficult.

Had the order been given earlier, "the lifeboats could have been launched calmly, people could have been reassured," Brusco said in Senate testimony.

Passengers have complained the evacuation was chaotic, with some left waiting in lifeboats for two hours before being able to leave the ship. Several bodies were found by divers in submerged evacuation assembly points, wearing life vests.

Sixteen bodies have so far been recovered and 16 are still missing after the 290-metre long cruise liner struck a rock near the Tuscan island.

As divers continued to comb the submerged parts of the ship, Dutch salvage team SMIT finalized preparations to remove fuel from the ship's tanks.

"We could finish today the process of inserting valves on six tanks," said a spokesman for the civil protection agency, which is in charge of operations regarding the Concordia. That would open the way for fuel removal to begin on Saturday.

(Additional reporting by Emilio Parodi on Giglio and Gabriele Pileri in Rome; Editing by Myra MacDonald)

• A Permanent Economic Emergency