The Swiss government on Wednesday suspended a deal to repair its damaged relations with Libya until two Swiss citizens held in the Arab country are allowed to return home.

Switzerland also toughened visa restrictions on Libyan citizens, in the latest Libyan-Swiss recriminations stemming from the arrest and brief detention last year of leader Moammar Gadhafi's son for allegedly beating up his servants in a Geneva luxury hotel.

"The Libyan side systematically refuses to cooperate," said a statement from the seven-member Cabinet, adding that Libya has "abducted" the two men and is denying even visiting rights as required under international law.

The decision came after repeated efforts by Switzerland to secure the release of the businessmen from an unknown location in Libya. Swiss newspaper La Liberte says Gadhafi's son Hannibal wants $50 million in exchange for their release, but authorities have refused to confirm the claim.

The plight of businessmen Max Goeldi and Rachid Hamdani has enraged Switzerland, which has publicly apologized for its treatment of Hannibal Gadhafi and subjected itself to possible compensation claims as part of an agreement reached in August in Tripoli.

Swiss frustration coincides with lingering anger in the West toward Moammar Gadhafi for giving a hero's return to convicted Lockerbie bomber Abdel Baset al-Megrahi, and for thumbing his nose at the international community by declaring at the U.N. in New York that the Security Council is a terror organization.

Libya has prevented the Swiss businessmen from leaving the country for more than a year. But it escalated the dispute after the August agreement by transferring them to a secret location "for their own security," citing the purported "threat that Switzerland might free them militarily," according to a Libyan government letter quoted by the Swiss Foreign Ministry.

The government's suspension of its deal with Libya was cheered Wednesday across the Swiss political spectrum. The Socialist Party voiced support for the tightened visa requirements for Libyan citizens, and the tougher approach also was backed by center-right parties.

It is unclear how Libya will respond.

In retaliation for Hannibal's 2008 arrest, it recalled some of its diplomats from Switzerland, suspended visas for Swiss citizens, withdrew funds from Swiss banks and reduced flights to the Alpine country.

The ongoing saga has become an embarrassment for the Swiss government and especially President Hans-Rudof Merz, who personally signed the deal with Libya and said he would "bear the consequences" if Goeldi and Hamdani weren't returned by Sept. 1. Since that deadline passed, he has ignored calls for his resignation.

Hannibal Gadhafi was held by Geneva authorities for two days in July 2008 before being allowed to return home. The complaint was eventually dropped after the two servants received compensation from an undisclosed source.