U.N.'s Ban warns time running out for Cyprus deal

NICOSIA Jan 9 (Reuters) - U.N. chief Ban Ki-moon warned Cyprus's Greek and Turkish leaders they were running out of time to settle their dispute over the island, and urged them to break a deadlock in talks at a summit in New York later this month.

In unusually blunt letters to both leaders, Ban laid out the differences between divided Cypriot communities that are still blocking efforts to reunify the country.

"The negotiation ... currently finds itself at an impasse on several issues," Ban wrote in both letters, seen by Reuters on Monday.

"I am concerned that opportunities to successfully conclude negotiations will be limited once the Republic of Cyprus takes up the presidency of the European Union on 1 July 2012," he added in the letters, dated Jan. 4.

Diplomats fear Cypriot politicians will be distracted by the presidency of the EU and spend less time on peace talks. They say the presidency could also alienate the island's Turkish leaders and widen differences between the two sides.

Greek Cypriots represent the whole of Cyprus in the EU, though in practice the island's effective membership is confined to the Greek-dominated south.

Cyprus was split in a Turkish invasion in 1974 after a brief Greek Cypriot coup engineered by the military then ruling Greece. Seeds of conflict were sown earlier, prompting the dispatch of a UN peacekeeping mission, now one of the world's longest-serving, in 1964.

Ban has invited President Demetris Christofias, the Greek Cypriot leader, and Turkish Cypriot leader Dervis Eroglu to Greentree, New York, for talks on Jan 22-24.

U.N. officials had hoped the discussions could produce some progress after three years of troubled negotiations.

But both sides remain divided on how they would govern the island together and demarcate territory.

Disagreements have also hit efforts to hold an international conference to hammer out the final phases of a settlement, wrote Ban.

Greece, Turkey and Britain would have to take part in any final agreement. They are guarantor powers of the island under a complex treaty which granted the former British colony independence in 1960. (Reporting By Michele Kambas; Editing by Andrew Heavens)