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By Jeff Franks

HAVANA, Nov 8 (Reuters) - Hurricane Paloma toppled trees, damaged homes and knocked over a communications tower as it ripped through Cuba on Saturday after striking the southern coast with 120-mile-per-hour (195-kph) winds as the island's third major storm of the year.

Forecasters said top winds had dropped to 115 mph (180 kph), still a Category 3 hurricane on the five-step Saffir-Simpson intensity scale, as Paloma headed northeast across Cuba's mountains. It was expected to weaken further on its way to the Atlantic Ocean.

It had grown to a Category 4 with 145-mph (230-kph) winds while barging through the wealthy Cayman Islands, where it ripped roofs off houses and storm shelters and flooded streets, before heading to Cuba.

Cuban state-run television reported widespread blackouts in the storm's wake and said a communications tower had fallen in the province of Camaguey, where Paloma made landfall on Saturday evening near the town of Santa Cruz del Sur.

Rains of up 10 inches (25.40 cm) were predicted, with heavier amounts possible in mountainous areas, the U.S. National Hurricane Center in Miami said.

A storm surge up to 20 feet (6 metres) had caused coastal flooding, pushing the sea as much as 2,300 feet (700 metres) inland and flooding hundreds of homes.

Television reports showed waves whipping up over coastal barriers, a beached boat listing on its side and, on shore, trees bending in the wind.

"The weather is really bad. It's raining heavily and the wind is blowing strong," said a woman called Mirtha, who was on watch in the town's Communist Party headquarters.

"I almost cannot open the windows but I can see some small palm trees that have fallen over," said the woman, who declined to give her full name.

Paloma, the eighth hurricane of a busy 2008 Atlantic storm season, came on the heels of Hurricanes Gustav and Ike, which caused an estimated $8 billion in damages when they devastated Cuba within 10 days of each other in August and September.

It was the second most powerful hurricane ever recorded in the month of November and struck almost 76 years to the day after a Nov. 9, 1932, cyclone that killed 3,000 in the same part of Cuba.

NO DEATHS

Cuba said more than a million people had been evacuated ahead of Paloma. So far, no deaths or injuries had been reported, but the storm promised to set back recovery efforts from Ike, which struck in the same region and then rampaged across much of the country.

"It's been such an effort to repair what Ike destroyed and now Paloma may knock it all down again. It's as if you finally dug yourself out of a hole in the ground and were pushed right back in," construction worker Orlando Estrada said from Holguin.

"I just repaired last week my roof that Ike destroyed," said construction worker Artemio Gonzalez in Las Tunas. "It will make me scream if Paloma breaks it again."

Ike and Gustav damaged almost 450,000 homes and devastated crops, compounding Cuba's economic woes at a time when its new president, Raul Castro, who took over from his brother Fidel Castro in February, had already warned of belt-tightening because of global financial turmoil.

In a statement published on Saturday, Fidel Castro rejected any aid from Cuba's archfoe, the United States, before it was even offered, demanding instead that Washington lift economic sanctions tightened by U.S. President George W. Bush.

Paloma pounded the British Caribbean territory of the Cayman Islands overnight.

George Town, the capital of the islands and one of the world's biggest offshore financial centers, appeared to have escaped the worst but there were reports of heavier damage in the smaller islands of Cayman Brac and Little Cayman.

The storm's winds were "like a brick slamming against a wall," said Moses Kirkconnell, a government minister for the smaller Cayman Islands. "We have got major damage but no major casualties," he said.

On Cayman Brac, two hurricane shelters lost their roofs during the hurricane, according to reports. In one shelter, people huddled in the kitchen until they could be evacuated.

The storm surge swamped the island's airstrip and left many areas under knee-deep water.

On Little Cayman, the roof of an apartment building caved in, trapping several people who had to be rescued. (Additional reporting by Shurna Robbins in George Town, Rosa Tania Valdes and Marc Frank in Havana; editing by Michael Christie and Peter Cooney)

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