"We feel abandoned by several friendly countries," he told cheering supporters.

"We are going to go on with life, we are going to go on with our government, we are going to go on with the next presidential elections on November 29.''

Consequences

Al Jazeera's Mariana Sanchez, reporting from Tegucigalpa, the Honduran capital, said there would have to be a significant movement by one side in order to find a resolution before representatives are due to meet again later in the week.

"Micheletti will have to bring something new to the negotiating table because the main point of the interim government is that they do not want Zelaya back in power and that is the key point that the international community is demanding," she said.

"The US could make this be over in a second if it imposed strong sanctions"

Mark Jones,
professor of political science at Rice University

Oscar Arias, the Costa Rican president, had proposed a deal to the two sides that would let Zelaya serve out the final months of his term, move up elections by one month to late October, grant a general amnesty and include representatives of the main political parties in a reconciliation government.

Philip Crowley, a spokesman for the US state department, said that Clinton had warned warned Michelletti that Honduras could face further cuts in economic aid if he did not comply.

"She reminded him about the consequences for Honduras if they fail to accept the principles that President Arias has laid out," he said.

Crowley did not specify the exact nature of the aid that could be stopped, but $16.5m military aid has already been suspended and a halt placed on development aid .

"We would like to see President Zelaya return to Honduras, and then we'd like to see a clear path that leads to follow-on elections," he said. 

Honduran business leaders said that they were called into meetings with Hugo Llorens, the US ambassador, and warned that the Central American nation could face tough sanctions if the coup leaders continue to reject Arias' proposal.

"The US could make this be over in a second if it imposed strong sanctions,'' Mark Jones, a professor of political science at Rice University in Houston, Texas, said.

"But in doing so it would hurt the poor, it would hurt our allies."

Impoverished

Impoverished Honduras is highly dependent on trade with the United States. About 70 per cent of Hondurans live in poverty and the per capita gross domestic product is just under $4,000 per year.

The European Union added to the pressure by announcing it was suspending $93.1m in aid to Honduras.

But Adolfo Facusse, the head of Honduras' National Association of Industries, was defiant.

"We prefer sanctions to Zelaya's return," he said, adding that such a move would bring "loss of liberty, dictatorship, communism".

Zelaya was ousted last month and forced into exile in a military coup backed by the judiciary and congress.

He has vowed to make a second attempt to return to Honduras at the weekend after the military prevented a previous attempt on July 5 by blocking the runway of the airport in Tegucigalpa.