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ATHENS (Reuters) - Greek Prime Minister Alexis Tsipras said on Saturday his government was on the final stretch of negotiations with its international lenders on a cash-for-reforms deal that would not involve further pension cuts and harsh austerity.
After four months of talks with its euro zone partners and the International Monetary Fund, Athens is scrambling for a deal that could release up to 7.2 billion euros ($7.9 billion) in remaining aid to avert bankruptcy as it remains shut out of bond markets.
Talks have stumbled over pensions, labor reform, fiscal targets and increases in value-added tax.
"We are on the final stretch of a painful and tough period shaped by the government's negotiations with the institutions," Tsipras, back from an EU summit in Riga, told his party's central committee.
Tsipras, who flew to Riga to press German Chancellor Angela Merkel and French President Francois Hollande for a political push to break the impasse, faces potential challenges from the hard-left faction in his Syriza party which opposes any deal that would involve further belt-tightening.
"Rest assured that in this negotiation we will not accept humiliating terms," Tsipras said. "The overwhelming majority of Greek people want a solution and not just an agreement ... it supports the government in this tough negotiation."
He lashed out at some lenders' representatives who, he said, were using his country's financial asphyxiation as a lever to undermine an accord reached on Feb. 20, under which Athens committed to present a new reform plan.
"We will not yield to irrational demands on VAT, pension and labor market issues when the architects of the most unsuccessful program in the IMF's history of rescue programs insist on extreme (measures) to not admit their failure," Tsipras said.
Athens has proposed VAT rates of 7, 14 and 22 percent in an effort to redistribute the tax impact and lighten the burden on lower income groups. But lenders want rates of 11 and 23 percent and are pressing for an increase in VAT on energy to 23 percent.
"We made steps to find common ground but we also have red lines," Tsipras said. "We have limits that the people's mandate, common sense and the country's need for growth oblige us to not violate."
He said Greece's EU/IMF bailout was not an economic mistake but a conscious choice by the domestic oligarchy, backed by the creditors, to load the burden of the debt crisis on pensioners, the self-employed middle class and small businesses.
"The recession was to a great extent desirable by its masterminds. We are trying to overturn this to enter a period of growth ... that will serve the interests of the social majority and will not undermine them to benefit the interests of an economic and political elite," he said.
Tsipras said a condition for achieving this was a viable deal with European lenders that was the product of mutual compromise.
Reporting by George Georgiopoulos; Editing by Janet Lawrence