MANILA, Philippines?The government on Sunday rejected a $2-million ransom demand by the kidnappers of an elderly Irish Catholic priest in the troubled south but said it would continue efforts to ensure his release.

Paying money to free Father Michael Sinnott, 79, went against state policy, a spokesman for President Gloria Macapagal-Arroyo, Cerge Remonde, told AFP.

"We will do everything to ensure his safe release," Remonde said. "We will, however, stick to the international policy of paying no ransom."

He said security forces on the southern island of Mindanao were continuing efforts to locate Sinnott, who was seized by gunmen from his missionary office in the southern city of Pagadian on October 11.

"Even the MILF is helping," Remonde said, referring to the 12,000-strong separatist group the Moro Islamic Liberation Front (MILF), which is negotiating a peace deal with the government.

Sinnott's kidnappers have released a video of the priest, showing him holding an October 22 issue of a newspaper in the first proof of life obtained by the local press.

"My kidnappers are led by commander Abu Jayad. They are asking $2 million as ransom money," the priest said while standing in front of what appeared to be a bed sheet or table cloth in a forested area.

"We are living in the open, in difficult circumstances. I am still in good health even if I do not have the full medicines."

News of the video, obtained by journalists Saturday, was received with relief by Sinnott's family and colleagues amid worries over his weak heart.

There have been conflicting reports about who is holding Sinnott, with the military initially saying he was kidnapped by a Muslim pirate active in the area.

Defense Secretary Gilberto Teodoro has said he believes Sinnott is being held by rogue elements of the MILF, a charge denied by the group.

The MILF meanwhile said it did not have an Abu Jayad among its ranks, but says it remains willing to deploy an armed unit for a joint rescue effort with government troops.

Sinnott's kidnapping is the latest in a long list of abductions of foreign missionaries and tourists in the south, where Al-Qaeda-linked militants as well as other Muslim armed groups operate.