``It has been a very difficult and serious discussion,'' the sources said. Holbrooke went directly to the US embassy after the talks wound up at 1.30 am and was still on the telephone to Washington almost four hours later, the diplomats said.

Washington's European allies on the other hand are growing increasingly resentful at the secrecy surrounding the on-going talks between Holbrooke and Milosevic, diplomats said on Monday.

``At a time when we are at a decisive phase, we are being kept in the dark about how the talks are progressing,'' one European Union diplomat told AFP.

Another said: ``As we move towards armed intervention in the heart of Europe, we are being told virtually nothing.'' The diplomat admitted that secrecy was a key element in ``this kind of negotiation'', noting thateach side was deliberately ``upping the pressure''.

``The Americans want at all cost to secure an `activation order' from NATO even if they don't use it,'' this diplomat said. The `activation order' would be the final step before the eventual launch of a military operation in Kosovo where NATO has ordered Milosevic to halt a crackdown on Albanian separatists and open talks with them.

Meanwhile, Vuk Draskovic, a leading Serbian Opposition figure urged Milosevic in an interview published here on Monday to comply with UN conditions over Kosovo.

None of these demands ``jeopardises the territorial integrity or the sovereignty of Serbia,'' said Draskovic the leader of the Serbian Renewal Movement (SPO).

In Washington, National Security Adviser Sandy Berger told CNN that Milosevic ``is not in compliance as of this point.'' ``He can come into compliance or he can face military action by NATO'' at any time, Berger said.

The Americans and Europeans are demanding that Milosevic halt the crackdown he launchedon February 28 against the separatist Kosovo Liberation Army.

The major obstacle appears to be Holbrooke's demand that Milosevic agree to an expanded international monitoring mission to verify compliance with demands of the UN Security Council.

Those demands include an immediate cease-fire, a withdrawal of special troops in the province, allowing refugees to return home and talks with ethnic Albanians on Kosovo's future.

Meanwhile, a report from Budapest said NATO has asked Hungary for permission to use its airspace for possible military action against Yugoslavia.

Hungarian Prime Minister Viktor Orban, speaking on state television last night, said the condition of any Hungarian participation is that NATO give guarantees to extend its protection to Hungary.

Hungary considers that especially important after Serbia's vice premier, Vojislav Seselj, warned last week that any neighbouring countries that support the NATO action would have to face the consequences.

Hungary's parliamentary parties allsupport such military action by NATO. In a vote last November, Hungarians overwhelmingly supported joining NATO. Formal admission is expected by April 1999.

Orban called a meeting of the state security cabinet for Monday and an extraordinary plenary session of parliament for Tuesday to give final approval.