Kiev says Russia has now largely withdrawn its forces, following a major military offensive last month that pushed back Ukrainian troops and gave separatist rebels the upper hand.

Speaking in a televised cabinet meeting, President Petro Poroshenko said: "According to the latest information I have received from our intelligence, 70% of Russian troops have been moved back across the border. This further strengthens our hope that the peace initiatives have good prospects."

Ukraine and the west have repeatedly accused Russia of fuelling the five-month pro-Russian rebellion with arms, vehicles and undercover Russian troops. Moscow denies the claim. In late August, Nato estimated that more than 1,000 Russian soldiers were operating covertly inside Ukraine, as part of a major separatist effort to roll back advances by Kiev.

Poroshenko said parts of east Ukraine would be given special status. He stressed, however, that Ukraine would remain a sovereign and united entity, under the terms of a peace deal agreed in Minsk last Friday.

The president conceded that the ceasefire was proving very difficult to maintain because of what he claimed were repeated violations by rebels forces. He said five Ukrainian soldiers had died since Friday, with another 33 injured.

A civilian was also killed over the weekend during shelling of the port city of Mariupol, controlled by the government and now on the frontline. Witnesses also reported shelling late on Tuesday in Donetsk, which, along with Luhansk, is under rebel control.

Poroshenko said Ukraine was currently regrouping its forces, not in preparation for a future offensive but in order to defend territory from possible renewed separatist attack. There has been speculation that rebels plan to seize Mariupol in an attempt to create a land corridor bridging their territory in the east with Crimea, occupied and annexed by Russia in the spring. The rebels claim a large chunk of eastern and southern Ukraine, including the second city of Kharkiv and the south-eastern port of Odessa.

It was unclear, however, what political settlement Poroshenko intended to offer the east. It was also doubtful that any initiative by Kiev would satisfy the separatists who have insisted on full independence or the kind of radical "federalisation" favoured by Russia. This would leave the regions effectively under Moscow's control. It would also weaken the pro-western government in Kiev, and make further steps towards its European integration practically impossible.

Poroshenko ruled out full-blown separation between the east and the rest of the country. "The Minsk protocol envisages the restoration and preservation of Ukrainian sovereignty on all the territory of the Donbass (in eastern Ukraine), including that controlled by the fighters. There is no question of federalisation or separation of any Ukrainian territory," he said.

Meanwhile, Angela Merkel said on Wednesday that she was in favour of implementing fresh European Union sanctions on Russia. Speaking to the German parliament, Merkel said the sanctions should be imposed immediately because a peace plan for Ukraine had not been fully implemented.

The EU has drawn up another round of sanctions against Russia but has delayed putting them into effect. The latest sanctions are expected to target Russia's energy and arms sectors, and to tighten access to international loans.

EU foreign ministers were meeting on Wednesday to discuss sanctions, with some nations in favour of waiting to see if the ceasefire became a meaningful reality. Merkel surmised that there had been an "improvement" on the ground in Ukraine but said "there is not a 100% ceasefire". She said that because of the lack of clarity over the peace plan she was in favour of the EU "publishing" the new sanctions - a move that would bring them into effect. They could be lifted again once the peace deal had been fully implemented, she said.

On Wednesday, Poroshenko signed a law allowing Ukraine to impose its own sanctions against Russian firms and individuals deemed to be backing the separatists in eastern Ukraine.

In Prague, the chairman of the Organisation for Security and Co-operation in Europe (OSCE), which is monitoring the ceasefire, said it would be reasonable to allow more time for the peace process before imposing further sanctions against Russia. Didier Burkhalter, president of Switzerland, also said the OSCE would soon deploy drones to monitor the ceasefire.

In Moscow, Amnesty International said it had documented evidence of war crimes by both sides and also repeated criticism of Russia's role in the conflict. "Amnesty International has called the conflict in Ukraine an international conflict and Russia a party to that conflict," the group's secretary general, Salil Shetty, told a news conference.