(Makes clear in paragraphs five and seven that the foreign minister's last name is Koussa and not Moussa)
* Swiss spat has caused visa problems for most of Europe
* EU says stepping up efforts to resolve dispute
* Libya wants probe into leaks photos of Gaddafi's son-Italy
By Daniel Flynn
ROME, Feb 17 (Reuters) - Switzerland and Libya are ready to end a row which has stopped Europeans entering Libya, but some conditions still must be met, Italian Foreign Minister Franco Frattini said on Wednesday after meeting his Libyan counterpart.
Officials said on Monday that Libya had stopped issuing entry visas to 25 European nations in response to a Swiss entry ban on scores of Libyan officials, including Libyan leader Muammar Gaddafi and his family. [ID:nLDE61E19Y]
That was the latest twist in a long-running dispute between Switzerland and Libya, sparked by the brief arrest of Gaddafi's son Hannibal in Geneva in 2008. The visa ban on "Schengen" countries widened that spat to affect most of western Europe.
Frattini said Swiss Foreign Minister Micheline Calmy-Rey told him by telephone on Tuesday evening that Switzerland was ready to scrap the travel ban on 186 Libyans provided that Tripoli releases two Swiss businessmen detained in 2008, in retaliation for Hannibal Gaddafi's arrest.
In his meeting on Wednesday, Libyan Foreign Minister Moussa Koussa told him that Tripoli was open to this deal but first wanted Switzerland to open an investigation into the leaking to the press of photos of Hannibal Gaddafi in police custody.
"My Libyan colleague told me today they have no problem with (ending the visa ban), but a key preliminary step must be the opening of an investigation into the leaking of the photos taken in a public office," Frattini told a news conference after the meeting, also attended by Maltese Foreign Minister Tonio Borg.
Frattini, who strongly criticised Switzerland on Tuesday for misusing the Schengen zone's visa rules to pressure Libya, said Koussa would travel to Madrid later on Wednesday to meet Foreign Minister Miguel Angel Moratinos. Spain currently holds the European Union rotating presidency.
ENERGY INTERESTS
Prime Minister Silvio Berlusconi's centre right government
has forged closer ties with former Italian colony Libya, where
Eni
Oil exporter Libya has been attracting growing foreign investment since it emerged from decades of international isolation and analysts said the visa move might harm its business reputation.
EU member states and partners in Schengen -- a borderless travel zone grouping 22 EU nations plus Switzerland, Norway and Iceland -- will meet in Brussels on Thursday to discuss the problem and EU foreign ministers will take it up on Monday.
Despite the discussions, EU officials were more downbeat than Italy on the prospect of an immediate solution.
"It is going to take a long time -- you are not going to have a miracle solution overnight. But everything that can be done is being done," Michele Cercone, European Commission spokesman on home affairs, told a briefing in Brussels.
Switzerland introduced its own restrictive visa policy last autumn but as a Swiss policy, it would not necessarily apply to other Schengen member states, officials say. It was not clear why Libya only reacted in the last few days.
Switzerland says it acted within Schengen rules and that it had targeted only a small number of applicants.
The dispute dates back to July 2008 when Hannibal Gaddafi and his pregnant wife were arrested on charges of mistreating two domestic employees, a case which was later dropped.
Hannibal has launched a court case against Geneva authorities and a newspaper for publishing a police photo.
In response to the arrest, OPEC member Libya halted oil exports to Switzerland, withdrew $5 billion in assets from Swiss accounts and detained two Swiss businessmen in Libya, Max Goeldi and Rachid Hamdani, both of whom are still there.
Frattini said Libya's move had not been "a total block" on entry by Schengen citizens into Libya. "In the last 24 hours, all the Italian citizens who needed to enter Libya have entered," he said. "My Maltese colleague told me the same thing."