Minsk: The leaders of France, Germany, Russia and Ukraine held peace talks in Belarus deep into the night, while in Ukraine pro-Moscow separatists tightened the pressure on Kiev by launching some of the war`s worst fighting.
Ukraine`s army said on Wednesday that 19 of its soldiers were killed in pro-Russian separatist assaults near the railway town of Debaltseve, some of the worst losses it has reported in nine months of war.
Rebels who tore up a five-month-old truce in January are trying to encircle government forces in Debaltseve, a strategic location that would let them link up their main strongholds.
Fighting has already killed more than 5,000 people, and Washington is now openly talking of arming Ukraine to defend itself from "Russian aggression", raising the prospect of a proxy war in the heart of Europe between Cold War foes.
A surge in fighting in the 24 hours before the summit, including a rocket attack that killed 17 people in government-held territory on Tuesday, could be intended to force Ukraine to accept a deal recognising the rebel advance.
The summit was being held in neighbouring Belarus under a Franco-German proposal to try to halt the fighting. Chancellor Angela Merkel and President Francois Hollande held talks with Ukraine`s Petro Poroshenko and Russia`s Vladimir Putin that a Ukrainian presidential aide said could continue well into Thursday morning.
The leaders were planning to sign a joint declaration supporting Ukraine`s territorial integrity and sovereignty, a Ukrainian delegation source said.
The source said a separate document would be prepared by a "contact group" of Russia, Ukraine and the Organization for Security and Cooperation in Europe affirming commitment to a ceasefire plan drawn up in Minsk last September and also signed by separatist leaders.
The comments were a partial read-out from the Ukrainian side and it was too early to say what compromise, if any, might be worked out between Ukraine and Russia.
The four leaders met alone at about 1715 GMT and then went into a full summit with their delegations.
Merkel, Poroshenko and Hollande were smiling when they entered the heavily decorated conference room, each of their places round the table marked by a small golden clock.
The talks could continue for at least another five to six hours, a Ukrainian presidential aide said early on Thursday, after the discussions had already been underway for seven hours.
"We`ve got another 5-6 hours of work. At least. But we should not leave here without an agreement on an unconditional ceasefire. There`s a battle of nerves underway," aide Valeriy Chaly said in a Facebook post.
Earlier, Poroshenko said that without a de-escalation of the conflict and a ceasefire the situation would get "out of control". Russian television showed him shaking hands with Putin.
Any breakthrough would likely depend on Ukraine making concessions, with advancing rebels unlikely to agree to halt and go back to previous positions.
The outcome of the talks is expected to influence discussions at an EU summit in Brussels on Thursday, when sanctions against Moscow will be on the agenda.
Still, Moscow expressed optimism. A Russian diplomatic source said it was 70 percent likely that an agreement would be reached.
Foreign Minister Sergei Lavrov said there had been progress in the run-up to the summit but Kiev could be holding back a deal by insisting on control of the Russian-Ukrainian border, part of which is held by the separatists.
The talks were taking place while an International Monetary Fund mission is trying to negotiate a bailout to save Ukraine from bankruptcy.
Prime Minister Arseny Yatseniuk said he hoped for a deal in the next 48 hours and IMF chief Christine Lagarde said she would make a statement on Ukraine early on Thursday.
Kiev and NATO accuse Russia of supplying separatists with men and weapons. Moscow denies it is involved in fighting for territory Putin calls "New Russia".
If the French and German leaders hoped their peace initiative would be met by conciliatory moves on the ground, the prospect of talks appears to have triggered the opposite, with the pro-Russian rebels determined to drive home their advantage.
Armoured columns of Russian-speaking soldiers with no insignia have been advancing for days around Debaltseve. Last week they captured the small town of Vuhlehirsk next to Debaltseve.
On the Russian side of the border, Moscow announced war games on Tuesday on the eve of the talks.
The United States has been openly discussing arming the Ukrainian government, a move that is opposed by European allies who say it would escalate the conflict while falling far short of giving Kiev the firepower needed to win.
President Barack Obama says he has yet to make up his mind on the question of sending weapons. He spoke by phone overnight to Putin, and the White House said he warned the Russian leader that the costs would rise if Moscow kept aiding the separatists.