The two sides appeared on the brink of a deal to re-start peace talks two weeks ago, but Western diplomats in Srilanka said fresh problems over an agenda for talks was holding up a deal, despite hectic moves by the Norwegians.
 
Norwegian special envoy, Erik Solheim, left on Friday after
his second visit to Sri Lanka this month on top of visits by Norway's Foreign Minister Jan Petersen and his deputy Vidar Helgesen who failed to clinch a breakthrough.
 
The rebel Liberation Tigers of Tamil Eelam (LTTE) insist on their 31 October proposal for self rule being taken up before a final political settlement to end three decades of ethnic bloodshed that has claimed more than 60,000 lives.

Opposing views

President Chandrika Kumaratunga on the other hand wants parallel talks on what she calls "core issues" while discussing
reconstruction and rehabilitation of war-ravaged areas of the
island's north-east.

"The president is looking for a quick harvest, but the Tigers
don't seem to want to go along at this moment," says a Western diplomat close to the process.

President Chandrika Kumaratunga
wants to discuss "core issues"

He said failure to revive talks would be a drawback for Sri
Lanka when representatives from Norway, Japan, the United States and the European Union meet in Brussels on Tuesday to review financial aid to the island.

"But the Tigers also can't go on for too long without agreeing to talks," says the diplomat.

"Economic policy"

However, international lenders say they are more concerned
about the government's economic policy, which is crucial to
extending budgetary assistance amid already down-graded growth forecasts by the central bank there.

"On the peace process, what is more important is that both sides uphold the ceasefire," an official of an international lending agency said. "What we are concerned about is economic policy. We are waiting for a clear signal."

However, both military officials and the Tigers say that the
ceasefire brokered by Oslo and in place since February 2002 is also under severe strain, particularly in the island's eastern province.
  
At least 13 people have been killed in the region since 25 April
and the victims included Tiger rebels, government security personnel and civilians.