The Swiss citizens "are as well as can be expected under the circumstances", the ministry said in a statement.

The men were returned to the embassy without an explanation. It is unclear whether they will now be allowed to leave the country.

A foreign ministry spokesman said Switzerland did not meet any of the conditions set by Libya's deputy foreign minister, Khaled Kaim, on Sunday. Kaim told the NZZ am Sonntag newspaper that the Swiss government should condemn a comment made by a Swiss parliamentarian calling for the hostages to be freed by force.

President Hans-Rudolf Merz and ABB, the company that employs one of the hostages, both said they were relieved that the hostages had re-emerged and were back at the embassy.

The latest development comes only five days after Switzerland announced it was suspending a treaty aimed at normalising relations with Libya.

The government said on Wednesday that Libya's "systematic refusal" to cooperate with Switzerland in the case of the two Swiss prompted that decision. The men have been prevented from leaving the country for more than a year and were taken to an unknown location in Libya in September.

Switzerland described the abduction a "violation of international law".

The men's plight became the most visible sign of a dispute that stems from the 2008 arrest in Geneva of a son of Moammar Gaddafi, Hannibal, and his pregnant wife. The couple had come to Switzerland for the birth of their child. Geneva police briefly took them into custody on accusations they had abused their domestic staff while staying at a luxury hotel in the city.

After two nights in detention, they were released on bail and left the country. The staff were later compensated, and the charges were dropped. The bail money was returned.

Merz went to Tripoli in August 2009 and apologised for the arrest, triggering heavy criticism at home for doing so. During his visit he signed an agreement with the Libyan prime minister to normalise relations. However, the deadline for its terms to be met elapsed on October 20.

New strategy

Since then speculation has been rife that Switzerland would change its strategy from that of quiet diplomacy which it had used up until that point.

There has been cross-party support in Switzerland for the government's harder stance.

The rightwing People's Party said the Swiss-Libyan treaty signed by Merz was worthless, and that the move was therefore not a "revolution".

The chairman of the foreign affairs committee of the House of Representatives, Geri Müller, described the suspension as a "logical and consistent step", which showed that the government was following a strategy.

Visa restrictions

The government also said earlier that it would continue its "restrictive visa policy" towards Libyan nationals wishing to come to Switzerland. It is unclear whether Switzerland would still pursue those sanctions.

Visa restrictions would hit a number of well-to-do Libyans who frequently come to Geneva for medical check-ups in private clinics.

Switzerland belongs to Europe's Schengen area. Members have a right of consultation and veto over the allocation of Schengen visas, so that certain Libyans could be prevented from travelling anywhere in the Schengen area, which covers 25 countries in mainland Europe.

The minister in charge of the Geneva police broke his long silence last week about the matter. Laurent Moutinot said he would not apologise for Hannibal's arrest, nor would he punish the officers involved because they had acted correctly.

He maintained that saying sorry would do no good anyway, referring to Merz's apology that to date has proved to have little or no effect.

swissinfo.ch and agencies