TEGUCIGALPA (Reuters) - The Honduran interim government defied international pressure on Wednesday and vowed there was “no chance at all” of ousted President Manuel Zelaya returning to office.

World leaders from President Barack Obama to Venezuelan President Hugo Chavez have told the new rulers of the Central American country to restore Zelaya, a leftist who was toppled by the army on Sunday and sent into exile after a dispute over presidential term limits.

The Organization of American States gave Honduras an ultimatum early on Wednesday to allow Zelaya back into office by this weekend or face suspension.

But the interim government’s response indicated there was little immediate hope of a negotiated solution to the crisis in Honduras, an impoverished coffee and textile producer.

Enrique Ortez, interim foreign minister, said Zelaya would be arrested if he came home, and said the interim authorities were sure that Zelaya had been removed in a legal process.

“We are not negotiating national sovereignty or the presidency,” he told Reuters in an interview. “There is no chance at all,” of Zelaya coming back to power.[nN01401959]

The crisis in Honduras has spiraled into the worst political turmoil in Central America since the U.S. invasion of Panama in 1989, posing a test both for regional diplomacy and for Obama’s ability to improve the United States’ battered standing in Latin America.

In further signs of isolation of the interim government, the Inter-American Development Bank said it was pausing all new loans to Honduras until democracy is restored, while Spanish Foreign Minister Miguel Angel Moratinos said Europe will not talk to the new rulers if they attempt to get in touch.

“(The interim government) is going to try, but it’s better they don’t try, because they will not get an answer from us and moreover the instruction that embassies from European Union countries have is to not attend any event, make contact, have any communication with the provisional authorities, that that is our position,” he told Spanish state radio.

But a spokesman for the Swedish government said EU states had not reached a common position on what diplomats would do.

The United States will wait until at least July 6 to decide whether to cut off aid to Honduras, a senior Obama administration official said.

NOT POPULAR AT HOME

Zelaya, who took office in 2006 and had been due to leave power in 2010, was forced out over his push to extend presidential mandates beyond a single term.

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He had become a divisive figure in Honduras, a coffee, textile and banana-exporter of 7 million people, especially after he allied himself with Chavez, a firebrand socialist who has sought to build regional leftist solidarity as a counter to U.S. influence.

Public support for Zelaya, a wealthy businessman, had dropped as low as 30 percent in recent months, with many Hondurans uncomfortable over his tilt to the left in a country with a longtime conservative, pro-Washington position.

But protesters have taken to the streets to demand his return and they clashed earlier this week with security forces firing tear gas near the presidential palace in the capital, Tegucigalpa. Zelaya called for more demonstrations.

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“Stay firm. Don’t abandon the streets until we have earned victory,” he told a Honduran radio station from Panama. He said the coup leaders would go on trial when he got back unless they quickly handed over power to him.

Zelaya gave up a plan to return home on Thursday, accompanied by a group of foreign leaders, to serve out his term. He said he now did not expect to return before the weekend, which a senior Obama administration official called a wise move that gives the OAS the chance to find a solution.

Although there was no announced OAS mission to Honduras, diplomatic sources in Washington said that OAS chief Insulza would seek channels of communication with the interim government through respected figures not involved in the coup, such as church leaders.

Asked about the chances of achieving a political solution, one diplomat in Washington said, “It’s really going to depend on whether this regime is willing to compromise, whether it wants to risk becoming a pariah in the region, whether it wants to face the possibility of sanctions.”

STRESS TEST OF U.S. DIPLOMACY

The crisis in Honduras erupted as the country struggles with a sharp decline in remittances from Hondurans living in the United States and in vital textile exports. Thousands of jobs have already been lost due to the slowdown in exports.

But coffee producers told Reuters exports had not been affected even after protesters blocked major highways in the interior of the country.

The Honduran coup has quickly become a “stress test” for the U.S. government’s commitment to defending democracy in Latin America.

“Unfortunately, Zelaya is an awkward poster child for democracy in Latin America, given his tenuous respect for the rule of law in recent weeks,” said Dan Erikson, of the Inter-American Dialogue.

Zelaya’s bid to organize a referendum on whether presidents should be able to run again was the final straw for the army. The supreme court had declared his plebiscite invalid.

The Pentagon said on Wednesday the U.S. military had postponed activities with its Honduran counterpart while the Obama administration reviewed the situation in Honduras.

The U.S. military has a task force of about 600 troops at a base northwest of the capital in Honduras, which was a U.S. ally in the 1980s when Washington helped Central American governments fight Marxist rebels.