* Swiss citizen Hamdani leaving Libya, lawyer says
* Second Swiss man emerges from embassy to start jail term
* Libya had threatened to storm embassy: Austria
* EU ambassadors went to embassy to show solidarity
(Updates with Swiss reaction, background)
By Salah Sarrar and Ali Shuaib
TRIPOLI, Feb 22 (Reuters) - Two Swiss businessmen left the shelter of their country’s embassy in Tripoli on Monday after Libyan police surrounded the building, apparently avoiding a major confrontation in a row that has drawn in governments throughout Europe.
In Brussels, Austrian Foreign Minister Michael Spindelegger said the police had threatened to storm the embassy if Tripoli’s ultimatum to hand over the two men was not heeded, and many EU ambassadors had gone to the building “to show solidarity”.
The dispute has threatened to undermine Europe’s booming business ties with Libya, an oil producer that has been attracting billions of dollars in foreign investment since it emerged from decades of international isolation.
One of the two men, Max Goeldi, emerged alone from the embassy to be met by a police general and a senior Justice Ministry official, who drove him off to start serving a four-month prison sentence for immigration violations.
Earlier, the other Swiss citizen who had taken refuge in the embassy, Rachid Hamdani, came out. His lawyer said he was being taken by car to neighbouring Tunisia after Libyan authorities gave him clearance to leave the country.
Spindelegger, attending a meeting of EU foreign ministers, said an escalation of the row had been avoided. “Last night there were many intense phone calls,” he told reporters.
“It was announced there was a deadline — either hand over the convicted Swiss citizens or the embassy would be stormed ... Many ambassadors of EU countries went then to the embassy to show solidarity.”
The diplomatic row between Libya and Switzerland took on a Europe-wide dimension last week when Tripoli said it would stop issuing entry visas to most European citizens, in retaliation for Switzerland’s imposition of visa restrictions on some Libyans.
In a statement, the Swiss Foreign Ministry said its diplomats were in permanent contact with Goeldi, who was now in the custody of the Libyan authorities.
“The Foreign Ministry continues to work towards a solution and points out that the safety of a foreign mission is the responsibility of the host country,” it said.
Both Swiss men have been barred from leaving Libya since July 2008 after police in Geneva angered Tripoli by arresting a son of Libyan leader Muammar Gaddafi on charges — later dropped — of abusing domestic staff. Libya denies there is any link between the two cases.
Speaking outside the Swiss embassy, senior Justice Ministry official Khaled Kouayeb said Libya, in demanding the surrender of the Swiss men, merely wanted the law to be respected.
“The first Swiss, Hamdani, is innocent and he was allowed to leave the country and go home and the second Swiss is going to prison to carry out his four-month jail term,” said Kouayeb, who was one of the officials who met Goeldi outside the embassy.
On Sunday Tripoli issued a deadline for Switzerland to hand over the two men by midday (1000 GMT) on Monday or face unspecified consequences.
Dozens of police surrounded the embassy building at one point, but the numbers were reduced before Hamdani then Goeldi, emerged from the compound.
Libyan officials had indicated previously that Hamdani would be allowed to leave Libya because he was acquitted of all charges, but a sticking point was Tripoli’s demand that Goeldi serve his sentence.
A police source said Goeldi was taken to Ain Zara prison on the outskirts of the Libyan capital.