Ecuador's finance minister has been forced out of office after a dispute with the country's president over a $300m (£168.7m, €242.5m) loan from Venezuela.

Rafael Correa said on Thursday night his relationship with President Alfredo Palacio had "become untenable in recent weeks" and he had come under undue pressure not to proceed with the Venezuelan loan proposal.

But many analysts also pointed to Mr Correa's supposed support for terminating a contract between Petroecuador, the state oil company, and Occidental of the US, which some in the administration accuse of having violated its exploration and export contract.

Mr Palacio and more moderate elements in the government are thought to fear that alienating US investors could jeopardise Ecuador's role in negotiations on a trade pact between Washington and the Andean countries.

Tension between the finance minister and the president has been evident for some time, and speculation has been rife in Quito that Mr Correa would seek an opportunity to leave the administration to pursue his own bid for the presidency or vice-presidency in elections next year.

"There will be some difficult decisions that need to be taken in the next few months," said a foreign diplomat in Quito. "It's much easier for Correa to leave a mess and say he was pushed out for trying to help the Ecuadorean people."

Recent polls suggest the left-leaning Mr Correa is much more popular than the president. Yesterday, public sector unions at the economy ministry began a strike in support of Mr Correa.

An academic with no political experience, Mr Correa developed a reputation during his three months in office as an outspoken critic of multilateral lenders, Washington and foreign investors.