Tamil Tiger rebels yesterday rejected a government compromise on administration of Sri Lanka's northeast, as European diplomats met with rebel leaders in an attempt to salvage the island's floundering peace process.

　　For the second time, the rebels turned down a government offer of administrative and financial authority in the Tamil-majority northeast, insisting instead on political powers if it is to resume peace talks to end the 19-year civil war that has killed 65,000 people.

　　"We regret to say that your suggestions are unsatisfactory and therefore unacceptable," the Tigers' chief negotiator Anton Balasingham said in a letter to Prime Minister Ranil Wickremesinghe.

　　The Liberation Tigers of Tamileelam began fighting for a separate state for ethnic Tamils in 1983, but in February last year signed a Norwegian-brokered cease-fire with the government aimed at a negotiated political settlement. But the rebels pulled out peace talks blaming the government for slow progress in reconstructing the war-torn northeast and demanding more authority in the region.

　　The rebels also pulled out of a crucial international donor conference due to start next week in Tokyo, Japan. It hoped to draw pledges of US billion in reconstruction aid for Sri Lanka over three years.

　　The government had resubmitted its proposal on the northeast to the rebels, initially rejected last week, saying the Tigers had misunderstood it and asked to meet with the rebels to discuss it.

　　Balasingham said they would only discuss the proposal if the government offered a draft framework along the lines suggested by the Tigers.

　　"We are prepared to resume negotiations if you reconsider your position and offer us ... an interim administrative structure along the lines proposed by our leadership," Balasingham said in his letter.

　　But shortly before the letter was released, chief government negotiator Gamini Peiris said the Tigers would be offered a "critical role in the reconstruction effort and disbursement of funds, whether or not they attend the conference."

　　"The government is agreeable in principle to an interim structure, but details are matters for negotiation and must be within the framework of the Sri Lankan legal system," he told reporters. "The differences are not insurmountable ... we still hope the LTT will turn up in Tokyo."

　　In the latest international effort to restart peace talks, British, Swedish and Dutch diplomats were meeting yesterday with Tamil Tiger leaders.