Greek PM says won't back down from red lines in EU/IMF talks

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Greek PM Tsipras delivers a speech during the Economist Conference on "Europe: The comeback, Greece: How resilient?" in Athens

Greek Prime Minister Alexis Tsipras delivers a speech during the Economist Conference on "Europe: The comeback, Greece: How resilient?" in Athens May 15, 2015. REUTERS/Alkis Konstantinidis

By Renee Maltezou and Karolina Tagaris

ATHENS (Reuters) - Greek Prime Minister Alexis Tsipras said on Friday his government would not back down from its red lines in negotiations with its foreign lenders but said a deal must be reached soon following months of talks.

Athens is fast running out of cash and talks with European Union and IMF lenders on more aid have been deadlocked over their demands for Greece to implement reforms, including pension cuts and labour market liberalisation.

Tsipras said the two sides had largely agreed on fiscal targets and VAT rates, but disagreed on labour issues and pension reform. He said an accord should include low primary budget surplus targets for 2015-16 and a debt restructuring.

"The deal must close there is no doubt about it," Tsipras told a conference. "However, some cannot have in the back of their minds the idea that, as time goes by, the Greek side's resilience will be tested and its red lines will fade out.

"If some people have it in the back of their minds, they should forget it."

Athens has depended on money from its 240 billion euro ($275 billion) EU/IMF bailout to keep paying its bills since 2010. It has not received any loan tranches since last August.

Earlier on Friday, the finance ministry said Greece had paid public sector wages due in mid-May, confirming scheduled payments as the country struggles to stay solvent, although it may find it harder to meet wage and pension commitments later this month as well as debt payments due in June.

For months, the government has been borrowing from different parts of the state administration to pay the wages and pensions of public sector workers.

Tsipras, who came to power in January on promises to end belt-tightening, said the government would not agree to further cuts to wages and pensions, a highly sensitive issue in Greece after a six-year austerity-induced recession, rising poverty and joblessness.

"From this podium I want to assure the Greek people that there is no possibility or chance that the Greek government will back down on pension and labour issues," he said.

Greece, which is fast running out of cash, hopes to reach a deal by the end of the month. However, the European Union and International Monetary Fund are demanding the implementation of pension and labour reforms agreed with former Greek governments.

"At this stage, we seem to have found common ground with the institutions on a series of issues and so we are very close to an agreement," Tsipras said.

"Of course, at the same time, some issues remain open. Some institutions insist on proposals for changes in the framework that defines the operation of an already deregulated labour market. These changes cannot be accepted."

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(Reporting by Karolina Tagaris and Renee Maltezou; Editing by Mark Heinrich and Crispian Balmer)