Baltic States – CIS, EU – Baltic States, Financial Services, Legislation, Russia

Fears are growing that the confrontation on the EU's eastern borders could engulf the whole continent after Russia sent troops to back a new offensive by pro-Kremlin rebels in southeastern Ukraine.

EU President Herman Van Rompuy said the 28 leaders meeting in Brussels agreed to take "further significant steps" if Moscow did not back down.

The European Commission, the EU's executive arm, has been ordered to produce options for new sanctions within a week, he said.

"Everybody is fully aware that we have to act quickly given the evolution on the ground and the tragic loss of life of the last days," Van Rompuy told a news conference.

German Chancellor Angela Merkel said the new sanctions would build on existing measures against Russia which mainly cover financial services, armaments and energy.

British Prime Minister David Cameron said it was "totally unacceptable that there are Russian soldiers on Ukrainian soil." Talking of a "deeply serious situation" he warned Russia that "if she carries on in this way the relationship between Europe and Russia, Britain and Russia, America and Russia will be radically different in the future."

The sanctions plan came after Ukrainian President Petro Poroshenko visited Brussels to urge the EU to take tougher steps against Russia which he accused of "military aggression and terror."

"We are very close to the point of no return, the point of no return is full-scale war, which is already happening in the territories controlled by the separatists," he told a news conference. "Today we are talking about the fate of Ukraine, tomorrow it could be for all Europe."

Lithuania's President Dalia Grybauskaite, whose Baltic nation is wary of a resurgent Russia on its own borders, gave a similar warning as she urged the EU to send military equipment to Kiev. "Russia is practically in a state of war against Europe," she said.

The EU delivered a further riposte to Russia on Saturday when it appointed Polish Prime Minister Donald Tusk, a vocal Kremlin critic, to replace Van Rompuy as its next president.

The EU and the United States have already slapped tough sanctions on Russia for its role in the Ukraine crisis, including Moscow's annexation of Crimea in March.

Moscow has denied any troop presence in its western neighbor, despite the capture of paratroopers by Kiev and reports of secret military funerals being held in Russia.

But NATO said Thursday that Russia had sent at least 1,000 troops to fight alongside the insurgents, as well as air defense systems, artillery, tanks and armored vehicles, and had massed 20,000 troops near the border.