KYIV, Ukraine - Ukrainian President Volodymyr Zelensky on Tuesday asked the international community to cover an expected budget deficit of $38 billion next year for his war-torn country, with Moscow's invasion badly hitting the economy.

Russian shelling meanwhile pummeled the eastern Donbas town of Bakhmut, where AFP journalists saw smoke rising from fierce battles between Russian forces and Ukraine troops trying to keep them at bay.

At the United Nations Security Council, Moscow called for action on its claim that Ukraine is preparing to detonate a nuclear "dirty bomb" to blame on Russia.

• Ukraine slams Russia's 'dirty bomb' claims as 'dangerous' lies
• US says no indication Russia has decided to use nukes in Ukraine

Such a scheme is "very dangerous but will be profitable for the Zelensky regime to remain in power," Russia's deputy UN ambassador Dmitry Polyanskiy.

But Western diplomats rejected the allegation, first made on Sunday by Russian Defense Minister Sergei Shoigu.

James Kariuki, the British ambassador to the United Nations, called it "transparently false."

"We have seen and heard no new evidence during this private meeting" of the Security Council, he said. "Ukraine has been clear, it's got nothing to hide."

Meanwhile US President Joe Biden issued a new warning over Russia's nuclear talk.

"Russia would be making an incredibly serious mistake were it to use a tactical nuclear weapon," he said.

• Wagner mercenaries buttress Russia's battered army

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'New Marshall Plan'

International support for Kyiv was in the balance Tuesday.

At an international reconstruction conference in Berlin, Zelensky urged European leaders to offer greater financial support for his country more than eight months Russian troops invaded.

"At this very conference we need to make a decision on assistance to cover next year's budget deficit for Ukraine," Zelensky said via video-link.

"It's a very significant amount of money, a $38 billion deficit," he added.

German Chancellor Olaf Scholz said that rebuilding Ukraine requires "a new Marshall Plan for the 21st century -- a generational task that must begin now."

Support from Italy, UK reconfirmed

Late Tuesday, Zelensky called new British Prime Minister Rishi Sunak to reaffirm ties.

He said on Twitter that the two had an "excellent conversation" and "agreed to write a new chapter in Ukraine-UK relations."

In an excellent conversation with @RishiSunak we agreed to write a new chapter in 🇺🇦-🇬🇧 relations but the story is the same - full support in the face of Russian aggression. I appreciate PM’s first call to Ukraine. And always grateful for the support of the 🇬🇧 people.

— Володимир Зеленський (@ZelenskyyUa) October 25, 2022

"But the story is the same -- full support in the face of Russian aggression," Zelensky said.

Downing Street said Sunak had assured Zelensky of Britain's "steadfast support."

In Italy, new Prime Minister Giorgia Meloni reaffirmed the support of her far-right government for Ukraine amid worries Italy could tilt toward Moscow.

"Italy is fully part of Europe and the Western world," Meloni said in her first speech as prime minister.

The country would "continue to be a reliable partner of NATO in supporting Ukraine," she said.

Democratic doubts in US?

But in Washington, the progressive faction of Democrats sparked turmoil when they released a letter on Monday that urged Biden to seek a negotiated settlement with Russia to end the war, and suggested they had limited patience with spending to support Kyiv's war effort.

"The alternative to diplomacy is protracted war, with both its attendant certainties and catastrophic and unknowable risks," said the letter signed by 30 Democrats.

Coming after the Republican House leader also suggested the US was giving too much money to Ukraine, the letter sparked fears that Washington's all-important support could be weakening.

But on Tuesday the Democrats suddenly revoked the letter. They said it was drafted more than three months ago when the battlefield situation was different, and released in error.

Pramila Jayapal, chair of the Congressional Progressive Caucus, stressed that the Democrats had supported every US package of military, social and economic aid for Ukraine since the war began.

"Every war ends with diplomacy, and this one will too, after Ukrainian victory," she wrote.

Battle for Bakhmut

In eastern Ukraine, Kyiv's troops said they were holding back the weeks-long push by Russia's elite Wagner force for the wine-making and salt-mining town of Bakhmut in the Donetsk region.

The US-based Institute for the Study of War said that battlefield information indicated that Russian forces have been losing ground, with Ukrainians recapturing a cement plant on the eastern outskirts of the town.

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As smoke rose through the rain over Bakhmut Tuesday and a Ukrainian missile appeared to bring down a Russian drone, a 28-year-old soldier, who would not be identified, claimed Ukraine's forces had made gains overnight.

Seven civilians were killed and three injured in Bakhmut a day earlier, the regional governor said.

In a residential area of the Bakhmut, AFP journalists saw blood stains on the ground in the wake of what residents said was a fatal attack the day before.

"I found a body here without a head. I'm in shock," said 58-year-old Sergii, adding: "It was a man. He was just walking on the street."

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© Agence France-Presse