U.S. holds off on cutting aid to Honduras

Soldiers stand next to graffiti outside the presidential residency in Tegucigalpa June 29, 2009. Leftist Latin American leaders rallied around ousted Honduran President Manuel Zelaya on Monday and tried to thrash out a response to an army coup that sparked protests in the impoverished nation and drew worldwide condemnation. The graffiti reads: ''This is the house of the people and we do not want the military coup makers''.

WASHINGTON (Reuters) - The United States said on Monday it views the ouster of Honduran President Manuel Zelaya as a coup but is not legally declaring this for now, a step that would require Washington cut off most aid to Tegucigalpa.

Zelaya, in office since 2006, was overthrown in a dawn coup after he angered the judiciary, Congress and the army by seeking constitutional changes that would allow presidents to seek re-election beyond a four-year term.

The Honduran Congress named an interim president, Roberto Micheletti, and the country's Supreme Court said it had ordered the army to remove Zelaya.

U.S. President Barack Obama's administration, the European Union and a string of other foreign governments voiced support for Zelaya, who was snatched by troops from his residence and whisked away by plane to Costa Rica.

"We do think that this has evolved into a coup," U.S. Secretary of State Hillary Clinton told reporters.

Whether the United States legally declares the event a military coup -- a determination that Clinton said it was "withholding" for now -- is vital because it could force U.S. President Barack Obama to cut off most aid to the country.

Under U.S. legislation, no aid -- other than for the promotion of democracy -- may be provided to a country whose elected head of government has been toppled in a military coup.

Asked if the United States was currently considering cutting off aid, Clinton shook her head no.

The State Department said that it was unable to immediately say how much assistance the United States gives Honduras.

OBAMA CRITICISM

Analysts said quick criticism of the coup by Obama and Clinton on Sunday pleased Latin American countries bitter about the long history of U.S. intervention in the region.

The Obama administration's stance contrasted with the equivocal position taken in 2002 by former President George W. Bush's administration, which was seen as tacitly accepting a coup against Venezuela's leftist President Hugo Chavez.

Clinton stressed the United States was working with other nations in the hemisphere to restore full democratic and constitutional order but stopped short of specifically calling for Zelaya to be restored to power.

A senior U.S. official who spoke on condition he not be named said that by holding off on a legal determination that a coup has taken place, Washington was trying to provide space for a negotiated settlement.

"Much of our assistance is conditioned on the integrity of the democratic system. But if we were able to get to a ... status quo that returned to the rule of law and constitutional order within a relatively short period of time, I think that would be a good outcome," Clinton said.

"Our priority is to try to work with our partners in restoring the constitutional order in Honduras," she added.

(Editing by David Storey)