WRAPUP 5-Pressure grows on Honduras, violence feared

(For full coverage of Honduras, click on [ID:nN28343997])

* U.S. warns of possible cuts to aid

* European Commission suspends payments

* De facto government says won't bow to pressure

* Zelaya supporters plan highway blockades, strike (Adds U.S. warning, planned protests)

By Simon Gardner and Esteban Israel

TEGUCIGALPA, July 20 (Reuters) - Honduras' de facto leader came under increased pressure on Monday to hand power back to the ousted president with Washington threatening to cut aid and Latin American leaders warning of bloodshed if he does not back down.

Efforts to broker an end to the power struggle in Honduras following a June 28 military coup collapsed on Sunday after interim leader Roberto Micheletti rejected a proposal to reinstate overthrown President Manuel Zelaya. [ID:nN19522687]

Costa Rican President Oscar Arias, the frustrated peacemaker in the talks, asked both sides to give him until Wednesday to broker a solution to the crisis. But Micheletti, who was appointed by Honduras' Congress after the coup, remained defiant despite being shunned by foreign governments.

"My position is unchangeable," he said in a speech on Monday at the presidential palace to a standing ovation.

U.S. Secretary of State Hillary Clinton held a "very tough phone call" with the caretaker president, warning him he could face cuts in economic aid unless he strikes a deal with his enemy, spokesman P.J. Crowley said. [N20129879]

"She reminded him about the consequences for Honduras if they fail to accept the principles that President Arias has laid out, which would (have) a significant impact in terms of aid and consequences, potentially longer-term consequences ..., for the relationship between Honduras and the United States," he said.

It was not clear what sanctions might apply but the options include slashing $180 million in economic aid.

The United States has already halted $16.5 million in military aid and multilateral lenders have put another $200 million on hold.

The European Commission also tightened the screws on Micheletti, suspending all budgetary support payments to Honduras. It had earmarked 65.5 million euros ($92.73 million) in payments in the 2007-10 period. [ID:nLK223534]

Latin American leaders fear violence in the impoverished Central American country unless Micheletti steps aside.