WASHINGTON, (Reuters) – U.S. State Department staff  have recommended that the ouster of Honduran President Manuel  Zelaya be declared a “military coup,” a U.S. official said yesterday, a step that could cut off tens of millions of dollars  in U.S. funding to the impoverished Central American nation.

The official, who spoke on condition he not be named, said  State Department staff had made such a recommendation to U.S.  Secretary of State Hillary Clinton, who has yet to make a  decision on the matter — although one was likely soon.

Washington already suspended about $18 million in aid to  Honduras following the June 28 coup and this would be formally  cut if the determination is made because of a U.S. law barring  aid “to the government of any country whose duly elected head  of government is deposed by military coup or decree.”

The official said $215 million in grant funding from the  U.S. Millennium Challenge Corporation to Honduras would also  have to end should Clinton make the determination that a  military coup took place.

According to the MCC, just over $80 million of this has  already been disbursed. A second U.S. official said this  implied the remaining roughly $135 million could not be given  to Honduras should the determination be made.

But MCC officials could not immediately say exactly how  much of the MCC funds for Honduras were in jeopardy.
Diplomats said the United States had held off making the  formal determination to give diplomacy a chance to yield a  negotiated compromise that might allow for Zelaya’s return to  power.

Such efforts appear, however, to have failed for now and so  the United States is taking steps — including its decision on  Tuesday to cease issuing some visas at its embassy in  Tegucigalpa — to raise pressure on the de facto government.
“The recommendation of the building is for (Clinton) to  sign it,” the first U.S. official said of the “military coup”  determination.

The official said this was a response to the de facto  government’s rejection of proposals put forward by Costa Rican  President Oscar Arias, whose mediation effort has stalled over  the government’s refusal to allow Zelaya to return to power.
The San Jose accord proposed last month by the Nobel Peace  Prize winner would have allowed Zelaya to return to office  until elections are held by the end of November.

The State Department said on Tuesday it would only provide  visa services to potential immigrants and emergency cases at  its embassy in Tegucigalpa.

A U.S. official who spoke on condition of anonymity told  reporters the visa decision was “a signal of how seriously we  are watching the situation” and said Washington was considering  other steps, though it was premature to disclose these.