Senior Nato commander, General Sir Michael Jackson, said Yugoslav generals had presented a proposal which would not guarantee the safe return of Kosovo refugees, or the full withdrawal of Serbian forces from Kosovo.

"Nato has no alternative but to continue and intensify the air campaign until such time as the Yugoslav side are prepared to implement the agreement fully and without ambiguity," General Jackson said.

Listen to General Sir Michael Jackson's statement

According to Nato, the Yugoslav position was inconsistent with what had already been agreed with Yugoslav President Slobodan Milosevic.

But both General Jackson and the Yugoslav delegation have left open the possibility of further talks.

BBC World Affairs Correspondent Rageh Omaar: "It seems that the delegations on both sides are divided on what to do"

Yugoslav spokesman Nebojsa Vujovic said after the talks broke up: "The Yugoslav delegation is ready for the continuation of talks and demands an end to the bombing."

The main areas of dispute are reported to have been over the timing of the proposed withdrawal and whether some Serbian forces would be allowed to stay in Kosovo.

The BBC's Jeremy Cooke: "It is clear that Nato and the Yugoslav authorities have very different political ideas"

Heavy bombing and air-raid warnings were reported in Serbia as the meeting drew to a close.

The air strikes had been scaled down in the last three days after President Milosevic said he would accept the joint Western-Russian plan.

Intense strikes

As the pullout talks in Kumanovo in the Former Yugoslav Republic of Macedonia faltered, there were air raid alerts in every major town and city across Yugoslavia in the early hours of the morning, but the capital escaped attack.

Nato bombed sites in Kosovo as the talks progressed

US B-52s dropped bombs on Yugoslav armed forces near the Morina border crossing from Kosovo into Albania.

Yugoslavia's state-run news agency Tanjug reported 100 explosions across Kosovo, with intense missile strikes in Pristina, Pec and about 30 other targets.

Kursumlija in Serbia was also hit and bombs smashed television and radio relay towers in the centre of the country.

(Click here to see a map of last night's Nato strikes)

UN resolution

Ministers from the Group of Eight industrial countries, are meeting on Monday to work on the text of a UN Security Council resolution on a settlement of the Kosovo crisis.

The Russian foreign minister, Igor Ivanov, is reported to have already left for the rescheduled meeting.

The G8 meeting had already been postponed once as talks between Nato and Yugoslavia were delayed.

As it became apparent that no agreement was to be implemented, European Union envoy, President Martti Ahtisaari of Finland postponed a trip to Beijing to brief Chinese leaders.

Serb atrocities

Nato has revealed that even after President Milosevic agreed to the peace plan on Thursday, Serb forces perpetrated further outrages in Kosovo.

The BBC's Jeremy Bowen reports on Serbian shelling from the Kosovo Albanian border

Over the last two days, there has been mass looting in Prizren and Pristina, and a group of displaced Albanian civilians has been shelled.

Nato's Secretary General Javier Solana, and the UK Prime Minister, Tony Blair, have called for President Milosevic to step down.

Mr Solana said Nato's bombing campaign had not been aimed at overthrowing President Milosevic, but the people of Serbia had to get rid of someone who had inflicted so much suffering and destruction.

(Click here to see a map of forces on the ground)

• The statements from both sides
• Piecing Kosovo together
• KLA highlights struggle for survival
• Serbs stony silence
• Q & A: What's in the deal
• Full text of the peace document

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