* President Correa and foreign minister deny media rumors
* Decision on asylum for WikiLeaks founder expected this week
By Eduardo Garcia
QUITO, Aug 14 (Reuters) - Ecuador denied a report on Tuesday that it had granted amnesty to WikiLeaks founder Julian Assange, and the country's foreign minister said only he and President Rafael Correa could make the decision.
Assange has been taking refuge in the Ecuadorean Embassy in London for the past eight weeks to avoid extradition to Sweden, where he is wanted for questioning on sex crime allegations.
The former computer hacker, who enraged Washington in 2010 when his WikiLeaks website published thousands of secret U.S. diplomatic cables, says he fears he could be sent to the United States, where he believes his life would be at risk.
Correa has said a decision on Assange's application is likely before the end of this week and that he will meet his foreign minister, Ricardo Patino, on Wednesday to discuss the case.
However, Britain's Guardian newspaper cited unnamed Ecuadorean government officials as saying amnesty will be granted. The report brought a swift response from Correa.
" The story is false ... When we make the decision we'll explain very clearly the reasons, the legal framework, the analysis that we made to grant or not asylum to Mr Julian Assange," Cor rea told a press conference in the coastal city of Guayaquil.
Speaking to Reuters on the sidelines of an event in the highland city of Ambato, Foreign Minister Patino also criticized the report by The Guardian.
"Anonymous sources are useless. Only the president and myself will make the decision ... there's nothing yet," he said.
Earlier, Patino told Reuters that Ecuador was pondering not only whether to give Assange asylum, but also how he might avoid arrest in Britain should he try to head to South America.
BREACH OF BAIL TERMS
By diplomatic convention, British police cannot enter the embassy without Ecuador's approval. But the WikiLeaks founder has no way of boarding a flight to the Andean country without passing through London and exposing himself to arrest.
"It's not only about whether to grant the asylum, because for Mr. Assange to leave England he should have a safe pass from the British (government). Will that be possible? That's an issue we have to take into account," said Patino, who has led Ecuador's analysis of the case.
Assange is in breach of his British bail conditions and the police have said he is liable to arrest if he steps out of the Ecuadorean Embassy, which is in London's affluent Knightsbridge area, miles from any airport.
It appears unlikely that the British government would grant Assange safe passage to an airport as that would mean going against the Swedish arrest warrant and a ruling by Britain's own Supreme Court that the warrant was valid.
Leftist Correa, a self-declared enemy of "corrupt" media and U.S. "imperialism," said he sympathizes with Assange but also respects the British legal system and international law.
The British government has made it clear to Ecuador that it is determined to extradite Assange to Sweden, the Foreign Office said in a statement on Tuesday.
Roger Gherson, a lawyer and expert on British immigration law and related human rights issues, said a grant of asylum by Ecuador would not protect Assange from being sent to Sweden.
"It's not a get-out-of-jail-free card for any conduct anywhere in the world," Gherson told Reuters.
British and Ecuadorean authorities have been discussing the case but have not indicated what the solution could be.
Assange has not been charged with any offense in Sweden or the United States. Swedish prosecutors want to question him about allegations of rape and sexual assault made by two WikiLeaks supporters in 2010. Assange says he had consensual sex with the women.
If Correa's government were to grant Assange asylum, U.S. trade ties with Ecuador could suffer over the long-term, American business leaders and analysts said on Monday.
"It's not a move destined to win many new friends in Washington," said Eric Farnsworth of the Council of Americas, a group that represents companies doing business in Latin America.