(Adds Italian reaction, paragraph six)

KABUL, April 8 (Reuters) - The Taliban on Sunday killed the Afghan translator of a Italian journalist, who was kidnapped and freed last month, because the government refused to free several insurgent prisoners, a rebel official said.

Afghan officials later confirmed the man had been killed, but gave no other details. There was no immediate word whether his body had been found.

La Repubblica reporter Daniele Mastrogiacomo was kidnapped along with his driver and the translator early in March.

The Taliban freed the Italian after about two weeks when Kabul released five of its senior members, but the group beheaded Mastrogiacomo's driver and held on to his translator in a bid to secure the release of more of their men.

"We waited a lot, but the government failed to meet our demand. Therefore, we killed him today," a spokesman for Taliban military chief Mullah Dadullah, Shahabuddin Aatil, told Reuters by satellite phone.

The Italian government condemned the "absurd bloodshed" and demanded the killers of both Mastrogiacomo's driver and translator be brought to justice.

The Mastrogiacomo deal was widely criticised in Italy and Afghanistan, with security experts warning it would trigger more abductions of foreigners.

Last week, two French aid workers -- a man and a woman -- were kidnapped along with three Afghan colleagues in the rugged, lawless Nimroz province between Iran and Afghanistan's opium heartland of Helmand province.

On Friday, President Hamid Karzai ruled out any more prisoner swaps with the Taliban. The Taliban are also holding five Afghan health officials and have demanded the release of more rebels.

The insurgents have not yet issued a ransom demand in return for freeing the French pair.

(Additional reporting by Phil Stewart in Rome)

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