A Libyan-Swiss row that resulted from the arrest of Moammar Gaddafi's son is one of Switzerland's toughest challenges abroad, President Pascal Couchepin has said.

Tension was sparked between the two countries in July by the arrest in Geneva of Hannibal Gaddafi and his wife. Servants of the two had accused them of serious mistreatment.

Couchepin said on Sunday that the situation was currently one of the "most difficult" the government faced abroad and a return to normal relations would "depend above all" on the Libyan leader.

Although the charges against the couple were dropped after the servants withdrew their complaint, Libya has demanded that Switzerland apologise over the incident for "abuse of Libyan diplomats and business people by the Geneva police".

Libya took a number of measures against Swiss firms and Swiss nationals at the time. It also threatened to withdrawn all its deposits from Swiss banks and disrupt oil supplies to the country.

Negotiations have been continuing between the two sides.

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