BRUSSELS (BLOOMBERG) - European Union leaders rejected an appeal from Germany and France to hold formal talks with Russian President Vladimir Putin, handing Dr Angela Merkel a rare public defeat at what could be her final EU summit as chancellor.

       The proposal was dropped from the final communique following talks that stretched into the wee hours of Friday (June 25), Dr Merkel said as she left the summit venue in Brussels.

       EU diplomats had earlier said that some countries in Eastern Europe were prepared to veto the plan, such was the strength of their opposition.

       "I would have wished for a more courageous step," Dr Merkel told reporters. "Formats and conditions will be developed for talks with Russia. But not at the leaders' level."

       The EU has not held summit talks with Mr Putin since the annexation of Crimea, but Dr Merkel argued that the EU cannot just outsource its relationship with Russia to the White House as United States President Joe Biden looks to establish contact.

       Her proposal, which was endorsed by French President Emmanuel Macron, alarmed many other leaders who felt they had been blindsided.

       "The Kremlin does not understand free concessions," Latvian Prime Minister Arturs Karins said heading into the talks. "The Kremlin understands power politics."

       The proposal was also publicly criticised by Dutch President Mark Rutte, who told reporters that he would not attend any talks with Mr Putin.

       Romanian President Klaus Iohannis said it is too early to talk about a summit with Russia and Estonian Prime Minister Kaja Kallas said she was surprised to discover the issue was even on the agenda.

       One diplomat familiar with discussions said that about a dozen member states had signalled they were uncomfortable either with the idea itself, or the way it emerged at the last minute.

       "It's not enough for the American President Joe Biden to speak with the Russian president - which I very much welcome - but the European Union must also establish a format for talks," Dr Merkel told Germany's Lower House of Parliament before she departed for the EU capital.

       The final conclusions on Russia also removed a reference to cooperating with Moscow in the fight against organised crime, a line which had raised eyebrows in some delegations.

       Instead of a leaders' summit, the EU agreed to "explore formats and conditionalities of dialogue with Russia".

       One compromise that was floated could potentially see Mr Charles Michel, who chairs EU leaders' summits, hold face-to-face talks with Mr Putin along with Ms Ursula von der Leyen, president of the European Commission.

       The EU's foreign policy chief Josep Borrell came under fire after a visit to Moscow earlier this year during which he stood quietly and failed to challenge Russia Foreign Minister Sergei Lavrov as he described the EU as an "unreliable" partner. Some member states had advised Mr Borrell not to make the trip.

       Dr Merkel and Mr Macron want to engage with the Russian president while containing his ambitions, and they are seeking to prevent individual member states from stepping out of line when it comes to Russia policy, an EU official said on condition of anonymity.

       Accusations of Russian-backed cyber attacks, extrajudicial killings and the poisoning and imprisonment of lead dissident Alexey Navalny have stoked tensions within the 27-member bloc on how to respond to the Kremlin.

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