Libya's relations with the European Union have returned to normal after a row over visas was settled but a dispute with Switzerland remains unresolved, Libya's foreign minister said on Sunday.

The visa crisis, which had threatened growing business ties between the EU and oil exporter Libya, was defused on Saturday after the bloc scrapped a travel black-list Switzerland had imposed on senior Libyans, and expressed its regrets.

'This issue has been resolved,' Libyan Foreign Minister Moussa Koussa said in an interview with Reuters on the sidelines of an Arab League summit in the Libyan town of Sirte. 'We have good relations with the Europeans and we have cooperation together. Just the problem of the Swiss when they put a blacklist. This was very bad,' he said.

'Now I think it's solved because the European Union, they decided to take off this blacklist and it's over now and everbody is welcome to come.'    

But when asked if this development would influence Libya's row with Switzerland, Koussa said: 'This is a separate issue.'    

Tripoli retaliated against the Swiss visa blacklist of 188 Libyans, including Libyan leader Muammar Gaddafi and members of his family, by barring entry to citizens from the Schengen borderless travel zone, which includes most states in Europe.

Switzerland insisted on Sunday that its visa ban on the senior Libyans had been made according to the Schengen rules.

'As an associate member, Switzerland applied the Schengen rules in force in conformity with legal requirements, which has furthermore been clearly confirmed by the European Commission,' the Foreign Ministry said in a statement.

'Switzerland's aim remains the release and departure from Libya of the Swiss national Max Goeldi.'         

The two countries have been locked in a fierce diplomatic row since July 2008, when one of the Libyan leader's sons, Hannibal Gaddafi, was arrested in Geneva on charges -- which were later dropped -- of mistreating two domestic employees.

Soon after the arrest, two Swiss businessmen were barred from leaving Libya. One of them, Goeldi is now serving a four-month sentence in a Libyan prison. Libyan officials say his case is not linked to Hannibal Gaddafi's arrest.   

Koussa said Libya would take part in talks on the dispute in the near future which he said would be mediated by Spain, holder of the EU's rotating presidency, and Germany.   

Asked about the prospects for an agreement, the foreign minister said: 'That's up to them (the Swiss). If they want to solve it we are ready. If they don't want to it's up to them.'    

Spain expressed regret on Saturday that some Libyans had been subject to a blacklist and said it was now scrapped.  Switzerland said in response to the Spanish statement that it had agreed to lift its visa ban on some Libyans as part of mediation efforts by the EU.

Libya viewed Hannibal Gaddafi's arrest as a deliberate act of humiliation. It has also demanded that Switzerland reverse the result of a referendum it held last year banning the construction of minarets on mosques.

Muammar Gaddafi has called for a 'jihad' against Switzerland. The term is commonly used to describe an armed struggle, but a Libyan diplomat said subsequently that Gaddafi had been referring to a trade embargo on the Swiss.   

A senior Libyan official, who did not want to be identified, told Reuters on Friday that Goeldi would be freed 'very soon'.

Goeldi's lawyer said if his client was to be released early it would happen after the Arab summit ends on Sunday. But Swiss officials played down such expectations.  'It would be a surprise for us if there was a release. It's going to take some more time,' said one. - Reuters