Paraguay's escalating diplomatic conflict with neighbors over its suspension from Mercosur and threatened exclusion from the Organization of American States shows no sign of abating.

An impassioned presidency of Federico Franco in Asuncion is helping to aggravate the impasse by pressing the OAS to take a position on the dispute rather than allow its mediators to negotiate a cooling off of tensions between the two sides.

Paraguay was suspended from Mercosur and the Union of South American States in June after its Senate impeached and removed Fernando Lugo from the presidency and installed Franco as the new head of state, a move denounced by Mercosur and Unasur as a coup.

Mercosur partners Argentina, Brazil and Uruguay then used the suspension as a timely hiatus to confirm Venezuela's full Mercosur membership, which had been opposed by the Paraguayan Senate.

Mercosur members set aside reservations about the governing style of Venezuelan President Hugo Chavez, giving priority instead to the oil-rich nation's huge, largely untapped consumer market.

Franco, stung by the resulting diplomatic isolation, has hit back at both Paraguay's suspension and Venezuela's admission, calling it null and void.

The split is nowhere as potentially damaging as in the OAS ranks, where Latin American countries are arrayed against each other on the question whether Paraguay should be suspended also from the OAS.

An OAS fact-finding mission that visited Paraguay found no reason to suspend the country but OAS members disagree. An EU investigation along similar lines has triggered calls to the European Union to reverse its endorsement of Franco's new administration.

Paraguay's Senate voted to impeach Lugo, a colorful left-wing Catholic priest who fathered several children, after both houses of Congress voted to begin the impeachment proceedings.

Lugo was faulted for his handling of clashes between farmers and police in which at least 17 people died.

Adding to the complications, Lugo accepted the impeachment but likened the move to a coup by the right-wing-controlled parliament. Mercosur and Unasur agreed with his designation of the vote as a coup but not his acceptance and promptly suspended Paraguay's membership.

Mercosur and Unasur also declined recognition of Vice President Federico Franco as Lugo's replacement.

But the OAS says, and the European Union seems to agree, that Franco is committed to holding new elections after his interim presidency ends next August. There is no case, therefore, for Paraguay's suspension, OAS argues.

Lugo backers appealed to the Paraguayan Supreme Court, ensuring the controversy will run and run.

Mercosur nations face the difficult task of painting themselves out of a corner or risk losing lucrative trade with Paraguay, including critical power-generation contracts that feed electricity into Argentine and Brazilian national power grids.

The diplomatic row has also dashed Mercosur hopes of an early free trade accord with the European Union, which was being negotiated before the Paraguay crisis hit the trade bloc.