The government’s decision to base formal talks on the legal and constitution framework ignored the demands of protesters for democracy, Lester Shum, vice secretary of the Hong Kong Federation of Students, told reporters today.

Student protesters are threatening to bring back the crowds that had paralyzed parts of central Hong Kong last week, after days of talks eased tensions in the streets. As the discussions hit a stumbling block, pressure increased on Chief Executive Leung Chun-ying who today had to refute a report that said he received money secretly from an Australian company.

“The only step forward for the government is to directly answer the people’s demand and the pursuit of democracy,” Shum said. “If we continue to insist on occupying and civil disobedience, that will give the biggest pressure to the government.”

Protesters had previously demanded the resignation of Leung and the scrapping of a proposal by China to vet candidates for the city’s 2017 leadership election. While both sides agreed to formal talks on Oct. 10, Leung had said he won’t resign and that China won’t change its plans.

“The entire pro-democracy movement is not optimistic about the outcome of the talks,” said Joseph Cheng, a political science professor at City University of Hong Kong. “There’s no such thing as a middle ground concerning a democratic system.”

Proposal Rejected

The two sides can’t agree on a venue for the Oct. 10 discussions with Carrie Lam, the city’s No. 2 official, and the students today rejected a government proposal to have a moderator.

Yesterday, the government said the discussions will focus on the constitutional basis for changes to the political system, while a second round will deal with legal requirement. The government has emphasized legal issues to rebuff demands for democracy, Shum said.

“We hope that we can stick to the items and then we can proceed to the meeting,” Lau Kong-wah, the government representative in initial discussions, told reporters today.

Demonstrators at the three main protest sites have thinned this week, dropping from a peak of 200,000 people to dozens of students. Tourists and office workers outnumbered protesters this afternoon at Admiralty, the hub of the rallies.

Under Pressure

“The government has agreed to meet the students as equals, but they don’t see the dialog as negotiations,” Regina Ip, a member of Hong Kong’s executive council, said on Bloomberg Television today. “They have no authority to speak for the Beijing leadership; it is unrealistic to expect Beijing to retreat so quickly from their August decision,” she said, referring to the rules set for the 2017 election.

Leung today came under questioning for a report in the Sydney Morning Herald that said he was paid more than A$7 million ($6.1 million) by UGL Ltd. in return for supporting the company’s business ambitions. The money was paid in 2012 and 2013 after he become the city’s top official, the newspaper said.

The payment was for bonus and wages owed to Leung for his work at DTZ Holdings Plc, which UGL had acquired, Leung’s office said in a statement. Leung had resigned as the Asia Pacific director of DTZ, a property broker, in November 2011 before he became chief executive, and the payments weren’t for services provided after that time, the statement said.

Free Elections

Some protesters have accepted that they won’t achieve their main goal of convincing the government in Beijing to let Hong Kong people choose the candidates to run in the 2017 election, the first public vote for the city’s top official. China has insisted candidates be vetted by a 1,200 nominating committee, guaranteeing a chief executive loyal to the government in Beijing, protesters say.

“There’s no hope for the central government to give us free elections,” said Jack Yip, 23, a philosophy student at the Admiralty protest site. “Even asking for a better represented committee is being idealistic.”

“After more than a week, the momentum has weakened and there are less people,” he said. “The government needs to apologize and the officials responsible need to step down. You have to at least do this so that we can back down.”