Final answer:
The Ottomans proposed the Ottoman Millet System, which allowed religious communities to govern themselves. Giolitti responded with a policy of appeasement to protect Italian interests.
Step-by-step explanation:
The Ottomans proposed the establishment of the Ottoman Millet System, which was a system that allowed religious communities within the empire to govern themselves according to their own laws and customs. This system provided a level of autonomy for religious minorities, such as Christians and Jews, but still ultimately placed them under Ottoman control. In response to the Ottoman's proposal, Giovanni Giolitti, the Prime Minister of Italy, adopted a policy of appeasement towards the Ottoman Empire to maintain peaceful relations and protect Italian interests in the region.