WASHINGTON (Reuters) - U.S. President Barack Obama said on Monday the coup that ousted Honduran President Manuel Zelaya was illegal and would set a “terrible precedent” of transition by military force unless it was reversed.

“We believe that the coup was not legal and that President Zelaya remains the president of Honduras, the democratically elected president there,” Obama told reporters after an Oval Office meeting with Colombian President Alvaro Uribe.

Zelaya, in office since 2006, was overthrown in a dawn coup on Sunday 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.

The European Union and a string of foreign governments have voiced support for Zelaya, who was snatched by troops from his residence and whisked away by plane to Costa Rica in his pajamas.

Obama said he would work with the Organization of American States and other international institutions to restore Zelaya to power and “see if we can resolve this in a peaceful way.”

“TERRIBLE PRECEDENT”

“It would be a terrible precedent if we start moving backwards into the era in which we are seeing military coups as a means of political transition, rather than democratic elections,” Obama said, noting the region’s progress in establishing democratic traditions in the past 20 years.

Despite Obama’s comments, Secretary of State Hillary Clinton said the administration was not formally designating the ouster as a military coup for now, a step that would force a cut-off of most U.S. aid to Honduras.

Under U.S. law, 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.

“We do think that this has evolved into a coup,” Clinton told reporters, adding the administration was withholding that determination for now.

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

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

The State Department has requested $68.2 million in aid for fiscal year 2010, which begins on October 1, up from $43.2 million. This covers funds for development, Honduran purchases of U.S. arms, military training, counter-narcotics and health care but does not include Defense Department aid, a U.S. official said.

White House spokesman Robert Gibbs said he did not believe Obama had spoken to Zelaya since the ouster.

He said the administration had worked in recent days to try to prevent the coup from happening, and “our goal now is on restoring democratic order in 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.

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.

“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.