(Adds high-profile hostage, border traffic, analysts, suspicion of U.S. involvement)

By Saul Hudson

CARACAS, March 3 (Reuters) - Leftist allies Venezuela and Ecuador escalated a crisis with Colombia on Monday, cutting diplomatic ties after their neighbor raided inside Ecuador in an attack that sparked troop deployments and warnings of war.

Colombia also fueled the tensions by accusing Venezuelan President Hugo Chavez of funding Marxist rebels in its country -- a charge denied by the anti-U.S. president's government.

The crisis erupted when Colombia flew troops into Ecuador on Saturday in a bombing raid that killed a senior rebel of the Revolutionary Armed Forces of Colombia, or FARC.

It was a major blow to Latin America's oldest rebel group and also eliminated a key contact for governments, such as France, Venezuela and Ecuador, in talks to free hostages held by FARC for years in jungle camps.

Chavez has brokered the release of six captives since the start of the year in those negotiations. On Monday, his government said he had been close several times to securing freedom for the most high-profile hostage, French-Colombian Ingrid Betancourt.

Latin American governments, including diplomatic heavyweight Brazil, lined up to condemn Colombia's attack and demand an apology for Ecuador.

Governments from France to the United States, as well as U.S. presidential candidates, also urged diplomacy to defuse the tensions.

Chavez ordered troops and tanks to the border with Colombia on Sunday and warned conservative President Alvaro Uribe, a staunch U.S. ally, that a similar strike on Venezuelan soil could lead to war. His foreign minister said Venezuela suspected Washington helped coordinate the Ecuador attack.

Ecuador also sent thousands of troops to the border.

Both leftist governments intensified their diplomatic measures against Colombia on Monday.

Ecuador announced it was cutting off diplomatic ties and Venezuela expelled all Colombian diplomats, a day after it withdrew all its own personnel from its embassy in Bogota.

COUNTER-ACCUSATIONS

Colombia's police chief said documents were found in the raid in Ecuador showing that Chavez gave the FARC $300 million. Venezuela denied the charge and said it had its own evidence that the police chief was a drug-trafficker.

Colombia also linked the slain commander, Raul Reyes, with an official close to Ecuador's President Rafael Correa.

"The government of Ecuador energetically rejects these accusations which cynically add to the hostile attitude shown in the recent violation of our sovereignty," Ecuador's government said.

Other governments criticized Colombia for sending troops into Ecuador.

"The territorial violation is very serious and needs to be condemned," Brazilian Foreign Minister Celso Amorim said. "Brazil condemns any territorial violation."

Traffic was normal at main border crossing points between Venezuela and Colombia, and while Venezuela said it reinforced the borders, there was no sign of a mass mobilization.

Despite the three leaders' brinkmanship and the risk of military missteps, political analysts said a conflict was unlikely on borders that stretch from parched desert through Andean mountains and jungles to the Pacific Ocean.

Chavez, the leader of a growing bloc of Latin American leftist leaders, may win points with supporters by challenging Uribe. But experts say he can ill afford to lose food imports from Colombia just as he tries to combat chronic food shortages in his OPEC nation.

(Additional reporting by Alonso Soto in Quito, Patrick Markey in Bogota and Raymond Colitt in Brasilia; Writing by Saul Hudson; Editing by Kieran Murray)

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