Thursday, October 8, 1998 Published at 17:54 GMT 18:54 UK
Albright: 'Kosovo diplomacy reaching its limits'
After being briefed on the earlier talks, Madeleine Albright asked Richard Holbrooke to return to Belgrade
The ethnic Albanian guerilla group the Kosovo Liberation Army has meanwhile declared a ceasefire, saying it wanted to create conditions for the fulfillment of United Nations demands for the pullback of Serbian forces.
She was speaking after US Balkan envoy Richard Holbrooke returned to Belgrade to put further pressure on Yugoslavia to comply with international demands.
Mr Holbrooke left Brussels immediately, and was expected in Belgrade by early afternoon.
Mrs Albright said Mr Milosevic had failed to understand the gravity of the situation. She reiterated international demands on Kosovo:
"I believe it is time for the [Nato] alliance to move to the next phase of its decision making: to take the difficult but necessary decision to authorise military force if Milosevic does not comply," the secretary of state said.
Clinton warns war could spread
The BBC Diplomatic Correspondent says it is increasingly unlikely that Nato will be able to back down from military action unless President Milosevic reverses his present policy, with the language of Mrs Albright's address leaving little room for blurring issues.
Russia, a Serbian ally, has said it will oppose any use of force over the issue of Kosovo. The Russian foreign minister, Igor Ivanov, met President Milosevic in Belgrade before going on to the Contact Group meeting.
Although Nato member states seem to be moving towards a common position, some European countries still have to seek parliamentary approval for using force against Yugoslavia.
Nato is also to debate the legal basis for acting without a further UN resolution, a concern still held by some European states. However, with Russia saying it will veto any UN authorisation, Nato sources say that any member insisting on UN authorisation knows that it is effectively saying it would prefer to do nothing, and there is optimism a consensus will emerge.
Nato is nevertheless holding out for a diplomatic solution to the crisis. As Mr Holbrooke returned to Belgrade on Thursday, Nato Supreme Military Commander Wesley Clark insisted that "this is a period in which we are still assessing [Yugoslavia's] compliance".
First talks fail
According to an official Yugoslavian statement, the talks identified differences between President Milosevic's and Nato's assessment of the situation in Kosovo.
The US Defence Secretary, William Cohen, has been giving details of military preparations in the event of Nato deciding to go-ahead with air strikes against Serbia.
The BBC Defence correspondent says there are signs that Belgrade is also readying its armed forces. He says that Belgrade's potential to fight back means that a Nato attack would need to knock out Yugoslav defences in one blow.
Embassy staff leave Belgrade
Around 10 diplomats remain in the British mission and they plan to leave the city if the situation deteriorates.
A number of Australians and American non-essential staff and are also thought to be leaving on Thursday. Aid organisations are also winding down their operations.