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Luca Bruno, Associated Press
Ukrainian president Petro Poroshenko, right, talks with Russian President Vladimir Putin, left, as French President Francois Hollande listens during a meeting in Milan, Italy, Friday, Oct. 17, 2014. European leaders and Russia signaled cautious optimism over a peace deal for Ukraine after a high-level meeting in Milan on Friday, but emphasized details still need to be worked out. European leaders are pressing Russian leader Vladimir Putin to fully respect a cease-fire deal signed last month in Belarus, which has reduced by not completely ended hostilities in eastern Ukraine.

MILAN — Ukraine's president on Friday hailed progress in Europe-brokered talks aimed at ensuring peace with Russia, with agreements nearing on a gas dispute and local elections in the east.

Petro Poroshenko told reporters that he and Russian President Vladimir Putin reached "moderate progress" on the issue of halted gas supplies during a meeting with the German and French leaders.

"We have agreed on basic parameters of the gas contract," Poroshenko said, adding that they were now looking for financing.

Russia cut off gas supplies to Ukraine in the summer over unpaid bills, raising the risks that Ukraine would siphon off gas from the pipeline passing through its territory from Russia to Europe. Europe is concerned that if Ukraine did so, Russia would cut off all flows through Ukraine, leaving parts of Europe without supplies in the dead of winter, as happened in the past.

Poroshenko also said that participants in the talks agreed that all provisions of last month's ceasefire deal must be implemented and the local elections in the east need to be held in line with the law he signed yesterday.

Putin limited himself to saying the results were "good."

Earlier, European leaders who joined Putin and Poroshenko at a breakfast meeting said they agreed to pursue deals on enforcing a cease-fire, border controls and elections. Details on implementation were being hammered out in subsequent meetings in Milan.

Putin and Poroshenko were due to have one more face-to-face before the end of the summit.

"We are closer together on some questions of detail, but the central point is whether the territorial integrity of Ukraine is really respected," Merkel said after a morning of talks, adding that elections in eastern Ukraine that comply with Ukrainian law must also take place.

On the Ukraine peace deal, one proposal under discussion was to deploy monitoring drones to control the border areas.

British Prime Minister David Cameron indicated progress in the talks but said Russia needed to get its troops and heavy weapons out of Ukraine.

"Vladimir Putin said very clearly that he doesn't want a frozen conflict, he doesn't want a divided Ukraine," Cameron said. "If that is the case, Russia has to take actions to put in place all that has been agreed."

Italian Premier Matteo Renzi also said he was "positive" about the talks.

"We cannot accept an unstable Ukraine, and so we will do all in our power to give back hope to Ukraine," he told reporters.

Putin spokesman Dmitry Peskov told reporters the talks were difficult but constructive.

Putin and Poroshenko were pictured shaking hands, as they had a month ago in Minsk, Belarus, when they reached a deal on a cease-fire that has reduced but not halted the hostilities in eastern Ukraine.

The fighting in eastern Ukraine between pro-Russian rebels and government troops began a month after Russia annexed the peninsula of Crimea. The West, in return, imposed economic sanctions, which Putin is eager to see lifted.

Ukraine and the West emphasize the need for the rebels to hold their elections in line with the Ukrainian law and the need to establish an efficient control on the border with Russia to prevent a flow of soldiers and weapons. Russia so far has been evasive on both issues.

Geir Moulson in Berlin contributed to this report.