* Panama Canal project may be suspended

* Cost overruns represent half of original contract value

* Sacyr shares fall 9 pct

By Elida Moreno and Elisabeth O'Leary

PANAMA CITY/MADRID, Jan 2 (Reuters) - The president of Panama said on Thursday he would go to Spain and Italy to pressure companies to honor contracts to expand his country's canal after a building consortium behind the project threatened to suspend work because of a row over costs.

The consortium - Spain's Sacyr, Italy's Salini Impregilo, Belgium's Jan De Nul and Panama's Constructora Urbana - said on Wednesday that $1.6 billion in cost overruns on the $3.2 billion plan to build a third set of locks for the canal should be met by Panama.

The consortium, known as Grupo Unidos por el Canal, said the Panama Canal Authority (PCA) had 21 days to respond to its demands during which work would continue, but the project would be suspended if that requirement was not met.

Just a few hours later, the PCA rejected the demand, hinting it could find others to complete the job. Shares in Sacyr, which heads the consortium, slumped 9 percent on Thursday.

Panamanian President Ricardo Martinelli accused the companies of "great irresponsibility" and said they had endangered the massive construction project, which has been a major driver of the Central American nation's economy.

Martinelli, who took power in 2009, said he expected Italy and Spain to uphold commitments to back the project which the countries' leaders made to him during his first year in office.

"So I'm going to go to Spain and Italy to demand this from them, because a company should not be able to put such a high amount of overrun costs on a project that belongs to humanity," he told reporters in Panama City.

The Spanish and Italian governments have a "moral responsibility" to help resolve the dispute because their companies were engaged in the construction, Martinelli said.

Jorge Quijano, the head of the PCA, said if the project were delayed due to the dispute, Panama would see it through.

"This work will be finished, never fear, even if it takes longer to complete," he told reporters.

Panama has already moved back the scheduled completion date for the expansion from October 2014 into mid-2015.

To see that the work was concluded, Quijano said the PCA had since November been in contact with insurer Zurich in North America, with which it had $600 million in surety bonds that could be used to support the project.

In addition, the PCA could tap the $1.2 billion it had not yet paid to the consortium to finish the work, he added. So far the PCA had only paid the contractors $2 billion, he said.