In a joint statement, French president Francois Hollande and German Chancellor Angela Merkel also urged Ukraine's security forces to stop their offensive on rebel-held positions ahead of the planned May 25 presidential election.
The warnings suggested the West might soon move to broaden its sanctions regime to include whole sections of the recession-bound Russian economy.
But the call for the pro-Western government in Kiev to row back its military action echoes a similar statement by Russian President Vladimir Putin on Wednesday, who set that as his condition for backing the election.
"If the internationally recognised presidential elections do not take place on May 25, this would destabilise the country further. France and Germany believe that in this case, appropriate consequences should be drawn," indicating stepped-up sanctions, the two leaders said.
Paris and Berlin said that "proportionate" force should be used to protect people and buildings as Kiev battles to wrest back control of more than a dozen towns and cities in eastern Ukraine held by pro-Russian insurgents.
However, they stressed that "the Ukrainian security services should refrain from offensive actions before the election".
Paris and Berlin also called for a "visible" withdrawal of Russian troops from the Ukrainian border. Putin said on Wednesday the estimated 40,000 servicemen had been pulled back but NATO said there was no sign of that.
Ukraine's interim president Oleksandr Turchynov said that Kiev was "ready for negotiations" with representatives from the region but "not terrorists whose mission is to destroy the country".
But the head of the separatists in the flashpoint eastern town of Slavyansk, Vyacheslav Ponomaryov, told reporters that "if the junta (the Ukrainian government) doesn't withdraw its troops, there will be no discussions".
While the diplomatic pressure on Russia intensified, the situation on the ground remained combustible as the southern city of Mariupol observed a day of mourning for up to 21 people killed in clashes on Friday between Ukrainian authorities and pro-Russian separatists.
An AFP reporter in Mariupol said passions were running high as the rebels set alight a captured Ukrainian army armoured vehicle, causing the ammunition inside to explode.
A crowd of several hundred pro-Russians had gathered around the town hall and smoke billowed from a barricade of burning tyres, AFP saw.
Interior minister Arsen Avakov said on his official Facebook page that the chief of the city's police force had been captured and snipers had been active during Friday's violence, which occurred as Ukraine commemorated the Soviet victory over Nazi Germany in World War II.
An attempt by around 60 rebels armed with automatic weapons to storm the city's police headquarters turned into a "full-scale military clash" when army and interior ministry troop reinforcements arrived, Avakov said.
He put the death toll from the near-two-hour combat at 20 rebels and one policeman, while another four policemen were wounded and four rebels were captured.
That sent the death toll from recent unrest to more than 100.
In addition to the 21 dead in Mariupol, some 14 troops have been killed and 66 servicemen wounded in Ukrainian army assaults on the rebels.
The fighting has also claimed the lives of more than 30 insurgents.
Clashes that resulted in a horrific inferno in the southern port city of Odessa last week claimed another 42 lives, most of them pro-Russian activists.
'Illegal' referendums planned
Meanwhile, preparations were in full swing for the disputed referendums in the two eastern regions of Donetsk and Lugansk, home to 7.3 million of Ukraine's total population of 46 million.
Merkel and Hollande dismissed the referendums as "illegal", amid Western fears it will hasten the break-up of Ukraine and could lead to all-out civil war on Europe's fringes.
Voters in Sunday's referendums will first be asked if they support the creation of two independent republics that many see as a prelude to joining Russia, as happened in Crimea.
The head of Donetsk's separatists, Denis Pushilin, has said their referendum will be held in "90 percent of the towns in the region" and turnout is expected to be 60 percent.
A poll released Thursday by the Pew Research Centre in the United States suggested 70 percent of Ukrainians in the east want to stay in a united country, while only 18 percent back secession.
Two in three respondents in the east, however, are unhappy with the Western-backed government in Kiev.
In a sudden about-face on Wednesday that stunned the world, Putin called on the rebels to postpone the referendums to allow dialogue to take place to ease the worst East-West crisis since the end of the Cold War.
But the insurgents immediately snuffed out the brief glimmer of hope, vowing to press ahead with the votes.
And after seemingly seeking to calm tensions over Ukraine, Putin test-fired missiles in a military drill and then flew to annexed Crimea on Victory Day, sparking outrage from Kiev and the West.
Britain's Foreign Secretary William Hague said that recent events had shown that Putin had lost his grip over the situation.
Putin "seems to have unleashed forces that he cannot control. Armed thugs with modern weapons are stirring old tensions and stoking new hatreds," Hague said.
"The deaths in Mariupol, Slavyansk and Odessa are a stark warning that this plan is spiralling out of control," the foreign minister said in an interview with the Daily Telegraph.