Libya has said it would retaliate if Switzerland did not hand over a convicted businessman being sheltered in its embassy by mid-day (1000 GMT) on Monday, the official news agency reported.

The businessman's case has been at the centre of a fierce diplomatic row between Libya and Switzerland that escalated last week when Tripoli stopped issuing visas to citizens of most European countries.

Libyan Foreign Minister Moussa Koussa summoned European Union ambassadors on Sunday night to hand them the ultimatum, Jana news agency said.

The agency quoted the minister as saying that by giving Swiss businessman Max Goeldi refuge in its embassy in Tripoli, Switzerland was in violation of international conventions on diplomatic immunity.

'Procedures will be taken in the event that the embassy does not implement what is required of it by the deadline,' the news agency reported. No details were given of what action the Libyan authorities plan to take.

The Libyan authorities want Goeldi to serve a four-month prison sentence after a court found him guilty of immigration offences. The news agency said a second Swiss businessman, Rachid Hamdani, would be free to go home if Switzerland complied with the ultimatum.

Hamdani was convicted of the same offences as Goeldi but his sentence was overturned on appeal. Both men have been barred from leaving Libya since July 2008, soon after Swiss police arrested a son of Libyan leader Muammar Gaddafi at a luxury lakeside hotel in Geneva and charged him with mistreating two domestic employees.   

The charges were later dropped and Libyan officials have denied any connection between the arrest in Geneva and the prosecution of the two businessmen.

Last week Libyan officials announced that they had stopped issuing visas to citizens from the Schengen area -- a borderless zone that includes Switzerland and most European countries.   

Libyan media said the move was retaliation for Switzerland putting several senior Libyans, including members of Muammar Gaddafi's family, on a visa black-list.
The European Union said it deplored the decision and EU foreign ministers convened urgent talks with Libyan officials to try to resolve the dispute. - Reuters