Government forces were seen retreating from the battlefield Wednesday as Russia-backed rebels continued their onslaught on the railroad junction of Debaltseve, the epicenter of fighting between the separatist and government troops in eastern Ukraine.

Fierce fighting around the town linking the two major separatist cities of Donetsk and Luhansk rages on despite a cease-fire deal brokered by European leaders which went into effect on Sunday and the withdrawal of heavy weaponry scheduled for Tuesday. Hundreds if not thousands of Ukrainian troops are believe to be trapped in Debaltseve, surrounded by advancing rebel troops.

Associated Press reporters on the road to the government-controlled town of Artemivsk saw several dozen Ukrainian troops retreating with their weapons from Debaltseve on Wednesday morning. Covered in dirt and looking tired, some of them were driving to Artemivsk in trucks while several other men, unshaven and visibly upset, were on foot. Angry that they had not received any reinforcement from the government, they said they had to retreat and walk for a whole day.

The separatists said they have taken control of the town and offered the Ukrainian troops the opportunity to surrender and abandon their weapons, a claim Ukraine denied.

Ukrainian military spokesman Anatoliy Stelmakh said in a televised briefing on Wednesday that the rebels launched five artillery strikes on Debaltseve overnight thus "grossly violating the peace accords."

AP journalists were turned back by rebel forces outside Vuhlehirsk, about 10 kilometers (six miles) west of Debaltseve, early on Wednesday and were unable to assess the status of the fight. Regular artillery fire, coming from the rebel side, was heard in the area.

Kiev has admitted that soldiers had been taken prisoner in Debaltseve, but gave no details on how many were seized.

Rebel spokesman Eduard Basurin said hundreds of Ukrainian soldiers had surrendered in Debaltseve. Russian state-owned television on Wednesday showed images of several dozen Ukrainian troops being escorted along a village road by the rebels.

Russian President Vladimir Putin, on a visit on Budapest on Tuesday, suggested that Ukrainian forces should lay down their arms.

Observers from the Organization for Cooperation and Security in Europe, the group responsible for monitoring the cease-fire, have attempted to go to Debaltseve since Sunday but have been blocked by the rebels.

The separatists' Donetsk News Agency on Wednesday quoted rebel official Maxim Leshchenko saying that the OSCE will be allowed to visit Debaltseve "soon" once their forces have finished the operation there.