RUSSIAN President Vladimir Putin called on Kiev to start immediate talks on a political solution to the crisis in eastern Ukraine today.

President Putin said the talks must have the goal of "safeguarding the legitimate interests of those people who live there."

The Russian president has previously called for talks between the central government and the rebels in the east and has pushed for federalisation to devolve more powers to the regions.

He did not, however, envision sovereignty for the two eastern regions that style themselves "Novorossiya," presidential spokesman Dmitry Peskov said later.

However, the European Union made no corresponding overtures, sticking to hostile rhetoric and giving Russia one week to reverse course in Ukraine or face new sanctions.

European Council president Herman Van Rompuy said the EU was working urgently on further restrictive measures.

Earlier, Ukrainian President Petro Poroshenko had claimed that his country was "close to a point of no return - full-scale war" with Russia.

The rebel forces have made gains against Ukrainian troops in recent days in the Donetsk and Luhansk regions which the Kiev government’s troops, despite continual pounding of the rebel cities with heavy artillery, have been unable to reverse.

Government forces have lost much ground, which is at least part of the reason that Kiev’s EU masters are, for the moment, abjuring any military solution, at least verbally.

Federica Mogherini, who was named on Saturday as Catherine Ashton's successor as EU High Representative for Foreign Policy, said there could be no military solution to the crisis and, while sanctions were being worked on, the diplomatic process would need to continue.

But, whatever the EU leaders are saying, the Kiev puppet government is constantly attempting to bomb the rebels into submission.

That has shown little success, however.

Kiev’s troops had been ordered to retreat from the towns of Novosvitlivka and Khryashchuvate.

They have also been trying to evacuate Ilovaisk in the Donetsk area.

"We are surrendering this city," said Colonel Andriy Lysenko.

"Our task now is to evacuate our military with the least possible losses in order to regroup."

And another spokesman claimed Russian tanks had attacked Novosvitlivka and "destroyed virtually every house."