Europe was keen to have Gaddafi as a partner - now it looks for answers as his cruel regime falls apart

As the unrest spreads, many Libyans are fleeing their homes.

Humiliated by the tyrant they once greeted as a friend and courted as a business partner, European nations are scrabbling to formulate a response as Muammar Gaddafi's bloody regime fights for survival.

Political condemnation, sanctions on arms sales, a freeze on bank accounts and a travel ban on Gaddafi's entourage head a meagre list of options for Europe. None of the leading choices is military, save the use of warships to evacuate the 5000 to 6000 Europeans stranded in Libya.

"As usual, it's too little, too late," said Italian Senator Emma Bonino, a leading European centrist heading calls for a no-fly zone to block Gaddafi's warplanes from attacking the rebels.

US Defence Secretary Robert Gates said France and Italy would be best placed to enforce a no-fly zone, but the idea has been downplayed by his French counterpart, Alain Juppe, and the North Atlantic Treaty Organisation is highly cautious.

"We (the European Union) are currently working on financial, commercial and political measures that can be taken," Juppe said. "There's no military intervention, although toughening sanctions of all kinds that can be taken, in particular on airspace, are worth studying."

Nato Secretary-General Anders Fogh Rasmussen said the alliance had no plans to intervene militarily.

The uprising against Gaddafi's 41-year-rule erupted a week ago, fed by revolts in Tunisia, Egypt, Yemen and Bahrain. At each turn, the European response has been criticised as too late and low-key.

But the fumbling has been acute in the case of Libya, reflecting reluctance among countries - including Britain, Italy and France - which eagerly rehabilitated Gaddafi six years ago, removing his tags of terrorist and pariah.

Big-money business deals cemented Gaddafi's return to Europe's top tables. Eni of Italy, BP of Britain and Wintershall of Germany set plans to invest tens of billions of dollars to tap Libya's lavish reserves of oil and gas.

The French armaments industry led the charge to sell Libya fighters, combat helicopters and military vehicles. Le Canard Enchaine this week reported France and Libya also struck a secret deal under which Paris would provide "military training for peacekeeping operations".

Switzerland yesterday became the first European country to freeze bank accounts held by his entourage, but critics say this is too late and ignores a bigger question. "Very few are asking how this money ended up in our banks in the first place," noted a British-based rights group, Global Witness.

Genuine concern and not just loss of face are also the cause of Europe's shaky response to the crisis, analysts admit.

Even if Europe were resolved to do it, tough intervention could worsen the turmoil and unleash a tide of refugees to Europe, according to some fears.